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Insured Must Reside at Dwelling for Homeowners Policy Coverage to Apply Plaintiff alleged that, on October 28, 2020, Hurricane Zeta caused significant damage to his property. Plaintiff alleged that Southern conducted an inspection which constituted “satisfactory proof of loss,” but that Southern failed to adjust the claim or provide compensation to Plaintiff following the inspection. Plaintiff alleged that he was forced to hire his own experts, and repair estimates. In Todd M. Korbel v. Republic Fire And Casualty Insurance Company And Southern Underwriters Insurance Company, No. 2:21-CV-2214, United States District Court, E.D. Louisiana (May 31, 2023) BACKGROUND Plaintiff sued seeking damages. Southern generally denied the allegations and asserted a number of affirmative defenses including that Plaintiff did not “reside” at the Property, and that he is therefore not entitled to coverage under the Policy. APPLICABLE LAW Residence under the Policy The plain, ordinary and generally prevailing meaning of the word “reside” requires more than purchasing a home or intending to move into it. Plaintiff argued that he received mail, including correspondence from Southern, at the Property, that he paid water and electric bills for the Property in his name, that he was at the Property every day performing work or checking on the Property, that he had stored some belongings at the Property, and that he had a homestead exemption on the Property. As the Fifth Circuit has previously explained to Plaintiff himself in a previous lawsuit, this evidence is insufficient to create an issue of material fact as to whether Plaintiff resided in or at the Property. In an earlier case Plaintiff brought similar claims for damages and statutory bad faith penalties under Louisiana law after a house that he had purchased, but not moved into, was damaged during Hurricane Katrina. The insurer raised the same lack of coverage defense to Plaintiff's claims for certain damages, arguing that Plaintiff did not reside at the property as was required under the insurance coverage contract. Although Korbel clearly spent a great deal of time working on the house and intended it to be his residence in the future, this evidence was insufficient to establish residence. Given that Plaintiff kept only a minimal amount of furniture there and did not engage in leisure activities at the house, but rather went to the Property to work on or check on the house the facts establish he did not reside there. In fact, Plaintiff admitted in his deposition that he did not move into the Property but was still living at another location at the time the Property was impacted by Hurricane Zeta. Accordingly, Plaintiff did not ‘reside' at the Property, and is not entitled to coverage under the Policy. ZALMA OPINION Homeowners policies require that the insured reside at the premises that is the subject of the policy. Since the evidence established Korbel did not reside at the premises but only visited for purposes other than residence and it was in no condition to live in, he did not meet the requirement of residence as he did not in a previous case he brought to the Fifth Circuit Court of Appeals. He could have purchased a policy for a property in the course of construction but did not. Once he lost with the same argument it was unwise to make the same losing argument to the to the USDC that had failed on an appeal to the Fifth Circuit. (c) 2023 Barry Zalma & ClaimSchool, Inc. Subscribe and receive videos limited to subscribers of Excellence in Claims Handling at locals.com https://zalmaoninsurance.locals.com/subscribe. Consider subscribing to my publications at substack at https://barryzalma.substack.com/publish/post/107007808 Go to Newsbreak.com https://www.newsbreak.com/@c/1653419?s=01 Barry Zalma, Esq., CFE, is available at http://www.zalma.com and zalma@zalma.com Follow me on LinkedIn: www.linkedin.com/comm/mynetwork/discovery-see-all?usecase=PEOPLE_FOLLOWS&followMember=barry-zalma-esq-cfe-a6b5257 Write to Mr. Zalma at zalma@zalma.com; http://www.zalma.com; http://zalma.com/blog; daily articles are published at https://zalma.substack.com. Go to the podcast Zalma On Insurance at https://podcasters.spotify.com/pod/show/barry-zalma/support; Follow Mr. Zalma on Twitter at https://twitter.com/bzalma; Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921; Go to Barry Zalma on YouTube- https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg; https://creators.newsbreak.com/home/content/post; Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library.

California’s Dumbest Criminals Must Pay Restitution After Frayba Tipton and William Tipton pled guilty to committing insurance fraud, they were ordered to pay victim restitution to Nationwide Insurance Company of America (Nationwide). Nationwide obtained a civil judgment an award of over $1,200,000 in civil litigation against the Tipton’s only to have the judgment discharged in bankruptcy. Nationwide then petitioned the trial court to convert the criminal restitution orders to civil judgments against both defendants. The trial court granted Nationwide’s petition and entered civil judgments against the defendants. In Nationwide Insurance Company Of America v. Frayba Tipton et al., C095606, California Court of Appeals, Third District, San Joaquin (May 26, 2023) the court agreed that the restitution order could be made collectible as a civil judgment and not subject to discharge in bankruptcy. BACKGROUND After a fire destroyed the defendants’ home, they filed an insurance claim in which they overstated losses related to the contents of their home. (People v. Tipton, supra, 3C083065.) Nationwide alleged in court filings that among the overstated losses was the claimed loss of an original Vincent van Gogh “Starry Night” painting which is still safely in a museum. Defendants pled guilty to a felony insurance fraud allegation and no contest to a felony perjury allegation, and the trial court placed them on five years of formal probation. After informing defendants of their right to have a judicial determination of the amount of restitution that would be owed to Nationwide and holding an evidentiary hearing to determine the amount, the trial court ordered defendants to pay $792,597.22 in victim restitution to Nationwide in 2016. Though defendants were later able to have the award against them discharged in federal bankruptcy proceedings, the order of discharge explained that “debts for most fines, penalties, . . . or criminal restitution obligations” were not discharged. In 2020, the probation department informed the parties that it would cease its efforts to collect restitution because probation had expired although they should have moved to incarcerate the Tiptons for failure to pay restitution. The trial court agreed with Nationwide after the hearing and the court entered civil judgments against each defendant in favor of Nationwide for over $1,000,000 (accounting for the outstanding unpaid restitution, plus 10 percent annual interest). DISCUSSION California law provides: “In every case in which a victim has suffered economic loss as a result of the defendant’s conduct, the court shall require that the defendant make restitution to the victim.” (§ 1202.4, subd. (f).) A trial court must order full restitution. A restitution order imposed pursuant to section 1202.4, subdivision (f) is enforceable “as if” it was a civil judgment and is enforceable in the same manner as is provided for the enforcement of any other money judgment. As made clear on the criminal order of restitution used in criminal cases Penal Code section 1214 provides that once a dollar amount of restitution has been ordered, the order is then enforceable as if it were, and in the same manner as, a civil judgment. The Victims’ Bill of Rights Act of 2008, known as “Marsy’s Law,” amended article I, section 28 of the California Constitution by expanding and constitutionalizing the protection of victims’ rights, including the right to restitution. (See People v. Gross (2015) 238 Cal.App.4th 1313, 1317.) A victim’s constitutional right to restitution cannot be bargained away or limited, nor can the prosecution waive it. Victims are first in line to receive any money collected from criminal defendants ordered to pay restitution. Because the California Constitution guarantees crime victims the right to restitution and that right is given a broad and liberal construction and statutes regarding the right should be construed in the context of the relevant statutory scheme. ANALYSIS The Court of Appeals concluded that the trial court did not err when it converted the restitution orders as it clearly had authority to deem them money judgments pursuant to section 1214, subdivision (b) and properly did so. While enforceable as if it were a civil judgment, a restitution order “is not a civil judgment” and the victim restitution statutes demonstrate legislative recognition of the distinct and separate right of a victim to pursue a civil remedy irrespective of the restitution order The plain language of section 1214 equates a restitution order to a civil judgment and articulates how such orders can be enforced within the criminal courts, but if a civil court is asked to convert such a restitution order into a civil judgment, as in the case here, it is not error for it to do so. The judgments are affirmed. ZALMA OPINION To claim that they lost the original Vincent van Gogh painting “Starry Night” was stupid enough since it is located in the Museum of Modern Art in New York and has been there for many years, should have made the fraud claim easy for Nationwide to prove and makes understandable the civil judgment and the restitution order. Even though they discharged the civil judgment in bankruptcy they could not discharge the restitution order. Nationwide can now collect over $1 million from any assets the Tipton’s have. They violated the terms of their probation by not paying restitution and should have been put in jail. The Tipton’s should consider their freedom from jail a lucky award. (c) 2023 Barry Zalma & ClaimSchool, Inc. Subscribe and receive videos limited to subscribers of Excellence in Claims Handling at locals.com https://zalmaoninsurance.locals.com/subscribe. Consider subscribing to my publications at substack at https://barryzalma.substack.com/publish/post/107007808 A ClaimSchool™ Publication © 2023 Barry Zalma & ClaimSchool, Inc., Go to my blog & Videos at: Zalma on Insurance, at https://zalma.com/blog, Go to the Insurance Claims Library,Listen to the Podcast: Zalma on Insurance, Videos from Zalma on Insurance,Subscribe to Barry Zalma on Substack.com,Go to Newsbreak.com https://www.newsbreak.com/@c/1653419?s=01,Subscribe to the e-mail Version of ZIFL, it’s Free! Read the last two issues of ZIFL here,Go to the Barry Zalma, Inc. web site here,Videos from “Barry Zalma on YouTube,” videos at Rumble.com at https://rumble.com/zalma, @Zalma on Truth Social; Follow me on LinkedIn here.

Theft by Authorized Representative Excluded

ZIFL - Volume 27, Issue 11 The Source For Insurance Fraud Professionals This, the eleventh issue of the 27th year of publication Zalma's Insurance Fraud Letter provides multiple articles on how to deal with insurance fraud in the United States. The issue begins with: Steal From the Government - Go to Jail New Statute Requires Sentencing Review In The People v. Howard Oliver, B317368, California Court of Appeals, Second District, Third Division (May 12, 2023) Howard Oliver appealed from the judgment entered after a jury convicted him of conspiracy to cheat and defraud Medi-Cal, Medi-Cal fraud; grand theft, false and fraudulent claims, insurance fraud, and four counts of tax evasion for 2012 through 2015. Oliver was sentenced to an aggregate sentence of seven years eight months in prison and ordered to pay over $2.85 million in restitution. Read the full article & full issue at ZIFL-06-01-2023 More McClenny Moseley & Associates Issues This is ZIFL’s seventh installment of the saga of McClenny, Moseley & Associates and its problems with the federal courts in the State of Louisiana and what appears to be an effort to profit from what some Magistrate and District judges indicate may be criminal conduct to profit from insurance claims relating to hurricane damage to the public of the state of Louisiana. Read the full article & full issue at ZIFL-06-01-2023 Dealing with Questionable Documents Bogus receipts and the need for confirmation of purchase are closely connected, guidelines applicable to both are suggested to avoid fraudulent claims. The following guidelines are in a certain order, and it is suggested that a “by the numbers” approach be followed so that the investigation can be most effective and successful. This order is suggested because the claims person will be establishing and preserving certain evidence that will be difficult for the insured to dispute as the handling and investigation evolves. Read the full article & full issue at ZIFL-06-01-2023 Good News from the Coalition Against Insurance Fraud After initially pleading not guilty last year, Connie Jo Clampitt has been found guilty of over $7M in medical insurance fraud. Clampitt has since pleaded guilty, and both she and her partner, Terrance Barnard, were indicted for healthcare fraud. Read about many more convictions and Read the full article & full issue at ZIFL-06-01-2023 Health Insurance Fraud Convictions Boston Man Sentenced to Two Years in Prison for Benefit Fraud Fernando Mateo Valenzuela, 69 a Hyde Park, Massachusetts man was sentenced May 24, 2023 in federal court in Boston for using a stolen identity to fraudulently obtain government assistance benefits. Valenzuela was sentenced by U.S. District Court Judge Leo T. Sorokin to two years and one day in prison and three years of supervised release. Valenzuela was also ordered to pay restitution of $29,051 to the Department of Unemployment Assistance and $7,230 to the Department of Transitional Assistance. Read about dozens more convictions and Read the full article & full issue at ZIFL-06-01-2023 Other Insurance Fraud Convictions Yucaipa Driver And Wife Sentenced After YouTube Videos Of Intentional Collisions Christopher Phelps, 40, of Yucaipa, and his wife, Kimberly Phelps, 40, were sentenced after pleading no contest to felony counts of insurance fraud, child abuse and assault with a deadly weapon. This comes after a Department of Insurance investigation revealed the couple caused collisions in an attempt to collect undeserved insurance payouts. Read about many more convictions and Read the full article & full issue at ZIFL-06-01-2023 It’s Time to Subscribe to Locals or Substack For Subscribers Only I Have Published Special Insurance Videos I published on Locals.com more than 25 videos and two webinars of the Excellence in Claims Handling program. I also published on Substack.com videos and webinars of the Excellence in Claims Handling Program available only to Subscribers. The subscribers have access to all the videos and a webinar on “The Examination Under Oath A Tool Available to Insurers to Thoroughly Investigate Claims and Work to Defeat Fraud” among others. The videos start with the history of insurance and work their way through various types of insurance and how to obtain and deal with insurance claims; Subscribe and receive videos limited to subscribers of Excellence in Claims Handling at locals.com; Subscribe to my publications at substack at substack.com/refer/barryzalma; Go to substack at substack.com/refer/barryzalma; Go to the podcast Zalma On Insurance at https://podcasters.spotify.com/pod/show/barry-zalma/support Read the full article & full issue at ZIFL-06-01-2023 (c) 2023 Barry Zalma & ClaimSchool, Inc. Subscribe and receive videos limited to subscribers of Excellence in Claims Handling at locals.com https://zalmaoninsurance.locals.com/subscribe. Consider subscribing to my publications at substack at https://barryzalma.substack.com/publish/post/107007808 Go to Newsbreak.com https://www.newsbreak.com/@c/1653419?s=01 Barry Zalma, Esq., CFE, is available at http://www.zalma.com and zalma@zalma.com Follow me on LinkedIn: www.linkedin.com/comm/mynetwork/discovery-see-all?usecase=PEOPLE_FOLLOWS&followMember=barry-zalma-esq-cfe-a6b5257 Write to Mr. Zalma at zalma@zalma.com; http://www.zalma.com; http://zalma.com/blog; daily articles are published at https://zalma.substack.com. Go to the podcast Zalma On Insurance at https://podcasters.spotify.com/pod/show/barry-zalma/support; Follow Mr. Zalma on Twitter at https://twitter.com/bzalma; Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921; Go to Barry Zalma on YouTube- https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg; https://creators.newsbreak.com/home/content/post; Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library

Search Warrant not a Claim In Brown Goldstein Levy LLP; Joshua Treem v. Federal Insurance Company, No. 22-1023, United States Court of Appeals, Fourth Circuit (May 18, 2023) the law firm of Brown Goldstein Levy LLP ("BGL") and one of its partners, Joshua Treem, (collectively, "Appellants") sued their insurer, Federal Insurance Company ("Appellee"), when it refused to provide coverage for costs Appellants incurred after the Government investigated Treem, executed a search warrant at BGL's office, and notified Treem that his representation of certain clients may present a conflict of interest. The district court dismissed Appellants' complaint, holding that there was no "Claim," as that term is defined in the insurance policy, and alternatively that any costs Appellants incurred were excluded from the policy's definition of "loss." FACTS The Government began investigating attorney Kenneth Ravenell ("Ravenell") in connection with a federal racketeering investigation. Ravenell engaged Treem and the firm to represent him in the investigation. The Government sent Treem a letter (the "Ravenell Conflict Letter") informing him that he was "now a subject of the investigation and [his] conduct [was] within the scope of the grand jury's investigation." On June 13, 2019, the Government obtained a search and seizure warrant for BGL's offices, which it executed on June 18, 2019. In executing the warrant, the Government seized tens of thousands of documents, including "all of Treem's emails, regardless of their relation to Ravenell or relevance to the ongoing investigation." That same day, the Government sent Treem's counsel a letter (the "Target Letter") to advise that Treem was "a target of the ongoing criminal investigation and the Grand Jury has substantial evidence linking Mr. Treem to the commission of crimes." Appellants sought relief in the district court, arguing that the seizure was beyond the scope of the investigation into Treem and Ravenell, and further objected to the Government's use of a "Filter Team" to inspect the documents seized for attorney client privilege. Appellants moved for a temporary restraining order and a preliminary injection and they prevailed at the Fourth Circuit. See In Re Search Warrant, 942 F.3d 159 (4th Cir. 2019). Appellants maintain that they incurred over $230,000 in defense costs related to the search warrant litigation. THE INSURANCE Appellants obtained a professional liability insurance policy from Federal covering claims made between November 21, 2018, and November 21, 2019 (the "Policy"). The Policy defines a "Claim" as any of the following: "(a) a written demand or written request for monetary damages or non-monetary relief; (b) a written demand for arbitration; (c) a civil proceeding commenced by the service of a complaint or similar pleading; or (d) a formal civil administrative or civil regulatory proceeding (including a disciplinary or grievance proceeding before a court or bar association) commenced by the filing of a notice of charges or similar document or by the entry of a formal order of investigation or similar document against an Insured for a Wrongful Act, including any appeal therefrom." Appellants gave notice to Appellee of their intent to seek insurance coverage pursuant to the Policy for the losses incurred in the search warrant litigation (the "Search Warrant Claim") and the defense costs associated with defending Treem in connection with the criminal investigation (the "Partner Claim). THE LITIGATION Federal sued asking the court to declare the parties' rights and obligations pursuant to the Policy and seeking damages for breach of contract. The district court issued an order granting Appellee's motion to dismiss. In doing so, the district court held that the Search Warrant Claim was not entitled to coverage pursuant to the Policy because it did not fall within the Policy's definition of a "Claim," and even if it did, the costs associated with the search warrant litigation do not constitute "defense costs" under the Policy. ANALYSIS Maryland courts only construe policies of insurance against the insurer when a policy term is "ambiguous." A policy term is considered ambiguous if, to a reasonably prudent person, the term is susceptible to more than one meaning. If no ambiguity in the terms of the insurance contract exists, a court has no alternative but to enforce those terms. The Government did not seek to redress any diminution of its legal rights, nor did it seek remedy for any harm brought upon it by Appellants The warrant application was not a demand or request for relief against the insured. The search warrant itself is not a "Claim" because it is not a written demand or request. Neither the search warrant application nor the resulting search warrant are "written demand[s] or written request[s] for . . . nonmonetary relief . . . against an Insured" as required by the Policy. Therefore, the Search Warrant Claim fails because Appellants cannot state a claim for relief. The Conflict Letters are not "Claims." Despite Appellants' attempts to characterize them as "demands," they are not. ZALMA OPINION Lawyers liability insurance covers many actions against the insured lawyers but the policies do not cover everything. The conduct of the government against Brown Goldstein Levy LLP and Joshua Treem were egregious and resulted in the Fourth Circuit issuing a restraining order against the government. However, what the government did was not a claim nor were the actions of the insured against the government defense costs. (c) 2023 Barry Zalma & ClaimSchool, Inc. Subscribe and receive videos limited to subscribers of Excellence in Claims Handling at locals.com https://zalmaoninsurance.locals.com/subscribe. Consider subscribing to my publications at substack at https://barryzalma.substack.com/publish/post/107007808 Go to Newsbreak.com https://www.newsbreak.com/@c/1653419?s=01 Barry Zalma, Esq., CFE, is available at http://www.zalma.com and zalma@zalma.com Follow me on LinkedIn: www.linkedin.com/comm/mynetwork/discovery-see-all?usecase=PEOPLE_FOLLOWS&followMember=barry-zalma-esq-cfe-a6b5257 Write to Mr. Zalma at zalma@zalma.com; http://www.zalma.com; http://zalma.com/blog; daily articles are published at https://zalma.substack.com. Go to the podcast Zalma On Insurance at https://podcasters.spotify.com/pod/show/barry-zalma/support; Follow Mr. Zalma on Twitter at https://twitter.com/bzalma; Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921; Go to Barry Zalma on YouTube- https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg; https://creators.newsbreak.com/home/content/post; Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library.

Claims of Post Loss Underwriting Fail In California, a policy was effectively rescinded because the insured misrepresented facts material to the decision of the insurer to insure or not insure regardless of claims of post loss underwriting. The remedy of rescission was originally created by the ecclesiastical courts of ancient England who were charged with reaching fair results rather than giving a money judgment. As courts of equity, they voided contracts that were obtained by mistake, misrepresentation, concealment or fraud. In the United States the equitable remedy of rescission is still available and the state and federal courts sit as either a court of law or a court of equity. In California the ancient equitable remedy was codified, in part, as follows: California Insurance Code §331 provides: "Concealment, whether intentional or unintentional, entitles the injured party to rescind insurance." Insurance Code §359 provides: If a representation is false in a material point, whether affirmative or promissory, the injured party is entitled to rescind the contract from the time the representation becomes false. Rescission has nothing to do with claims other than as a consideration during a claims investigation. Underwriting is a decision making process based upon information submitted to the insurer by the proposed insured. When the proposed insured lies to obtain the insurance, the insurer may seek equity from the court and have the contract declared void from its inception. To do otherwise would be unfair and allow a fraud to profit from wrongful conduct. Rescission is an important equitable remedy hoary with age. It should not be limited by claims of bad faith. When an insurer learns it was deceived into insuring someone it would not have insured, it should be able to legitimately exercise the rights provided to parties to an insurance contract by the California Insurance Code, without fear of a tort action. Rescission is not, as some members of the plaintiffs' bar would have courts believe, post loss underwriting. Since underwriting is a decision-making process where the underwriter takes information from a proposed insured in an application for insurance and, using that information, to make a reasoned decision whether to agree to insure the applicant. Underwriting is only done after a loss when considering a request to renew. As you read in the following determine if any underwriting was done by the insurer after the loss. In Nieto v. Blue Shield of California Life & Health Ins. Co., 181 Cal.App.4th 60, 103 Cal.Rptr.3d 906 (Cal. App. 2010) the California Court of Appeal noted that Plaintiff and appellant Julie Nieto failed to disclose information about her medical condition and treatment on a health insurance application she submitted to defendant and respondent Blue Shield of California Life & Health Insurance Company (Blue Shield). She filed an action against Blue Shield after it rescinded her insurance policy. The trial court granted Blue Shield's motion for summary judgment, ruling that it was entitled to rescission as a matter of law in view of the undisputed evidence that appellant made material misrepresentations and omissions regarding her medical history. The undisputed evidence established that the information appellant provided to Blue Shield was false and, contrary to appellant's assertions, Blue Shield had no statutory duty to show that appellant's application had been physically attached to the insurance policy nor to conduct further inquiries during the underwriting process to ascertain the truthfulness of appellant's representations before it issued the policy. Approximately two months after a November 2008 hearing, the trial court issued an order granting summary judgment. It determined the undisputed evidence satisfied the elements of fraud or deceit justifying Blue Shield's rescission of the policy. More specifically, it found the undisputed evidence showed that appellant's application contained a number of material false representations and omissions concerning appellant's medical history; appellant was either aware the representations were false or exhibited a reckless disregard for the truth; appellant made the representations with the intent of inducing Blue Shield's reliance thereon; Blue Shield relied on the information in the application; and Blue Shield was harmed by issuing the policy. Given this undisputed evidence, the trial court further determined that the Insurance Code gave Blue Shield the right to rescind the policy. The record before the court supported the conclusion of the trial court that Blue Shield adequately pleaded the issue of fraud in its answer, asserting as affirmative defenses upon which Blue Shield relied and did not discover the falsity thereof until the time of rescission. Even if Blue Shield had not pleaded the issue of appellant's fraud as an affirmative defense an affirmative defense may be raised for the first time in a summary judgment motion absent a showing of prejudice. Because Nieto had sufficient notice of and an opportunity to respond to Blue Shield's motion asserting that her fraud justified rescission of the policy, she suffered no prejudice by responding to the motion on the merits. The undisputed evidence established that Nieto made material misrepresentations and omissions on the application regarding her medical condition and treatment. Nieto responded negatively to the inquiries in the “Medical History” portion of the application, when in fact appellant had suffered from chronic back problems throughout 2005 and previously. Nieto represented that her last doctor's visit had occurred three years earlier, when in fact she had seen and received significant treatment from Dr. Nation in February 2005, and she had seen Dr. Rockenmacher at least 17 times between February and May 2005, including the day she signed the application. Finally, Nieto represented that she had not taken or been directed to take any prescription medications in the past year, when in fact she had filled at least 10 prescriptions for four different medications and had received two steroid injections as well as an oral steroid. The undisputed evidence further established that Nieto's misrepresentations and omissions were material to Blue Shield’s decision to insure her. According to Blue Shield Life's underwriting guidelines, the medical conditions reflected in Nieto's medical and pharmacy records, if disclosed on her Application, would have rendered Nieto ineligible for enrollment in any Blue Shield Life IFP product. Although the trier of fact is not required to believe the "post mortem" testimony of an insurer's agents that insurance would have been refused had the true facts been disclosed. Nieto asserted that her declaration, in which she averred that she did not intend to defraud Blue Shield, created a triable issue as to whether she misrepresented or omitted material facts. The Court of Appeal noted, in response, that the rule in insurance cases is that a material misrepresentation or concealment in an insurance application, whether intentional or unintentional, entitles the insurer to rescind the insurance policy ab initio.1 Moreover, the rule is codified in the Insurance Code so that any material misrepresentation or the failure, whether intentional or unintentional, to provide requested information permits rescission of the policy by the injured party. Accordingly, evidence showing that Nieto lacked any intent to defraud failed to create a triable issue of fact. Nieto's application contained material misrepresentations and omissions concerning her medical history and conditions, medications taken, and recent physician visits. Had she accurately and completely disclosed these matters, she would have been denied coverage. Based on the undisputed facts, Blue Shield Life was entitled to rescind Nieto's policy. (c) 2023 Barry Zalma & ClaimSchool, Inc. Subscribe and receive videos limited to subscribers of Excellence in Claims Handling at locals.com https://zalmaoninsurance.locals.com/subscribe. Consider subscribing to my publications at substack at https://barryzalma.substack.com/publish/post/107007808 Go to Newsbreak.com https://www.newsbreak.com/@c/1653419?s=01 Barry Zalma, Esq., CFE, is available at http://www.zalma.com and zalma@zalma.com Follow me on LinkedIn: www.linkedin.com/comm/mynetwork/discovery-see-all?usecase=PEOPLE_FOLLOWS&followMember=barry-zalma-esq-cfe-a6b5257 Write to Mr. Zalma at zalma@zalma.com; http://www.zalma.com; http://zalma.com/blog; daily articles are published at https://zalma.substack.com. Go to the podcast Zalma On Insurance at https://podcasters.spotify.com/pod/show/barry-zalma/support; Follow Mr. Zalma on Twitter at https://twitter.com/bzalma; Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921; Go to Barry Zalma on YouTube- https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg; https://creators.newsbreak.com/home/content/post; Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library.

Rescission & The Covenant of Good Faith The covenant of good faith and fair dealing was first reported in 1766 in the British House of Lords in Carter v. Boehm, S.C. 1 Bl.593, 3 Burr 1906, 11th May 1766, when Lord Mansfield decided against the insurer who claimed he was deceived by the insured because the insurer was not deceived and knew more about the risks than did the insured. Lord Mansfield noted that the policy broker, who produced the memorandum given by the governor's brother (the plaintiff and insured) to him: and the use made of these instructions was to show that the insurance was made for the benefit of Governor Carter, and to insure him against the taking of the fort by a foreign enemy. The insurer contended that the plaintiff ought to have discovered the weakness and absolute indefensibility of the fort. In this case, as against the insurer, he was obliged to make such a discovery, though he acted for the governor. Lord Mansfield noted that the special facts, upon which the contingent chance is to be computed lie most commonly in the knowledge of the insured only: the underwriter trusts to his representation and proceeds upon confidence that he does not keep back any circumstance in his knowledge, to mislead the underwriter into a belief that the circumstance does not exist, and to induce him to estimate the risk, as if it did not exist. Keeping back such circumstance is, Lord Mansfield concluded, a fraud. Therefore, the policy is void. Even if the suppression of material facts should happen through mistake, without any fraudulent intention; yet still the underwriter is deceived, and the policy is void; because the risk run is really different from the risk understood and intended to be run, at the time of the agreement. The policy would equally be void against the underwriter, if he concealed; as, if he insured a ship on her voyage, which he privately knew to be arrived: and an action would lie to recover the premium. Good faith forbids either party by concealing what he privately knows, to draw the other into a bargain, from his ignorance of that fact, and his believing the contrary. The policy insured against the risk of the loss for Fort Marlborough, from being destroyed by, taken by, or surrendered unto, any European enemy, between the 1st of October 1759, and 1st of October 1760. It was underwritten on the 9th of May 1760. The underwriter knew at the time, that the policy was to indemnify, to that amount, Roger Carter the Governor of Fort Marlborough, in case the event insured against should happen. Lord Mansfield noted that the underwriter who knew Carter to be the governor, at the time he took the premium--and the plaintiff proved without contradiction, that the fort was only intended and built with an intent to keep off the country and that the only security against European ships of war, consisted in the difficulty of the entrance and navigation of the river, for want of proper pilots. That the general state and condition of the said fort, and of the strength thereof, was, in general well known, by most persons conversant or acquainted with Indian affairs, or the state of the Company's factories or settlement; and could not be kept secret or concealed from persons who should endeavor by proper inquiry, to inform themselves. The computation of the risk depended upon the chance, “whether any European power would attack the place by sea.” If they did, it was incapable of resistance. The underwriter at London, in May 1760, could judge much better of the probability of the contingency, than Governor Carter could at Fort Marlborough, in September 1759. He knew or might know everything which was known at Fort Marlborough in September 1759. The contingency, therefore, which the underwriter insured against is “whether the place would be attacked by an European force; and not whether it would be able to resist such an attack, if the ships could get up the river.” Lord Mansfield found that there was no imputation upon the governor, as to any intention of fraud. The reason for the rule against concealment is, to prevent fraud and encourage good faith. If the defendant's objections were to prevail, Lord Mansfield concluded, the rule of concealment would be turned into an instrument of fraud. The underwriter, here, knowing the governor to be acquainted with the state of the place; knowing that he apprehended danger, and must have some ground for his apprehension; being told nothing of either set of facts; signed the policy, without asking a question. Lord Mansfield found that an ethical underwriter with knowledge of the risks being taken, equal to or better than that of the person insured, could not, in good faith, claim that material facts were concealed from him because utmost good faith required the underwriter to use his superior knowledge to favor the insured. The attempt at rescission failed but, simultaneously the 1766 decision setting forth the covenant of good faith and fair dealing implied in every contract of insurance has survived to this day as an effective tool for insurers to defeat attempts at insurance fraud. And the “marine rule” first enunciated by Lord Mansfield, that a misrepresentation or concealment of material fact, whether intentionally or innocently made, is a basis for rescission if the underwriter, the risk taker, is deceived. (c) 2023 Barry Zalma & ClaimSchool, Inc. Subscribe and receive videos limited to subscribers of Excellence in Claims Handling at locals.com https://zalmaoninsurance.locals.com/subscribe. Consider subscribing to my publications at substack at https://barryzalma.substack.com/publish/post/107007808 Go to Newsbreak.com https://www.newsbreak.com/@c/1653419?s=01 Barry Zalma, Esq., CFE, is available at http://www.zalma.com and zalma@zalma.com Follow me on LinkedIn: www.linkedin.com/comm/mynetwork/discovery-see-all?usecase=PEOPLE_FOLLOWS&followMember=barry-zalma-esq-cfe-a6b5257 Write to Mr. Zalma at zalma@zalma.com; http://www.zalma.com; http://zalma.com/blog; daily articles are published at https://zalma.substack.com. Go to the podcast Zalma On Insurance at https://podcasters.spotify.com/pod/show/barry-zalma/support; Follow Mr. Zalma on Twitter at https://twitter.com/bzalma; Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921; Go to Barry Zalma on YouTube- https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg; https://creators.newsbreak.com/home/content/post; Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library.

Rescission Is a Remedy That Must be Used with Care Insurers must use the rescission remedy with care. Insurers should never assume that the promise to pay indemnity to the insured under a policy of insurance can, with impunity, be broken by advising the insured that the insurer has rescinded the policy. Rescission without sufficient evidence is wrongful. Rescission without the advice of competent counsel is a tactic fraught with peril. Rescission without a thorough investigation is dangerous. Where no valid ground for rescission exists, the threat or attempt to seek such relief may constitute a breach of the covenant of good faith and fair dealing which is implied in the policy and expose the insurer to tort damages for that breach, including punitive damages. One plaintiffs’ lawyer became wealthy when he learned that claims people were given a rubber stamp that said “RESCISSION” and had no idea what it was, what was needed to prove rescission and even how to spell “rescission” jurors were angered and punished the insurer. The policyholder’s lawyer would take the claims person’s deposition and ask them to spell the word. When the claims person failed his bad faith case was established. When they spelled the word correctly, he would ask the adjuster to state the elements necessary to effect a rescission. Almost none could answer appropriately. If sufficient evidence exists, the rescission remedy will deprive the insured or the insurer of all rights under the policy. The court will conclude that the contract never existed and neither party has any right under the contract. When an insurer submitted undisputed evidence that the disclosure of potential claims or suits is material to it in the underwriting of professional liability policies and according to the declaration of its underwriter the nature and circumstances giving rise to a potential claim or suit affect whether the insurer will increase the premium charged for the policy, change the policy terms or reject the submission without a quote. The question on the application plainly sets up an objective standard, not simply the insured's subjective assessment of the likelihood of suit. From an objective standpoint, any experienced civil litigator would know that the attitude of a client or former client who has suffered a loss in court can quickly move from acceptance to recrimination, especially after consultation with independent counsel. Without specific and admissible evidence the rescission will fail. A thorough investigation collecting admissible evidence and in full compliance with state law must be convincing before rescission is attempted. Adapted from my book The Equitable Remedy of Rescission of Insurance Available as: A Kindle book, A Paperback or a hardcover https://www.amazon.com/Equitable-Remedy-Rescission-Insurance-Effective-ebook/dp/B0B4F59LPP/ref=tmm_kin_swatch_0?_encoding=UTF8&qid=1655832188&sr=8-1. (c) 2023 Barry Zalma & ClaimSchool, Inc. Subscribe and receive videos limited to subscribers of Excellence in Claims Handling at locals.com https://zalmaoninsurance.locals.com/subscribe. Consider subscribing to my publications at substack at https://barryzalma.substack.com/publish/post/107007808 Go to Newsbreak.com https://www.newsbreak.com/@c/1653419?s=01 Barry Zalma, Esq., CFE, is available at http://www.zalma.com and zalma@zalma.com Follow me on LinkedIn: www.linkedin.com/comm/mynetwork/discovery-see-all?usecase=PEOPLE_FOLLOWS&followMember=barry-zalma-esq-cfe-a6b5257 Write to Mr. Zalma at zalma@zalma.com; http://www.zalma.com; http://zalma.com/blog; daily articles are published at https://zalma.substack.com. Go to the podcast Zalma On Insurance at https://podcasters.spotify.com/pod/show/barry-zalma/support; Follow Mr. Zalma on Twitter at https://twitter.com/bzalma; Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921; Go to Barry Zalma on YouTube- https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg; https://creators.newsbreak.com/home/content/post; Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library.

The Business Of Insurance Is Subject To The Law Of Unintended Consequences As If It Were On Steroids The law of unintended consequences is not statutory. No state or federal government has enacted it into law. No executive has signed the law. It is, rather, a law of the nature of people. It is an adage or idiomatic warning that an intervention in a complex system always creates unanticipated and often undesirable outcomes. General observation requires the hypothesis that actions of people, especially of governments, will always have effects that are unanticipated or unintended, has been proved. Economists and other social scientists have heeded its power for centuries. Regardless, for just as long, politicians, insurers and popular opinion have largely ignored the law of unintended consequences to their detriment. There is no common-law duty for a court, especially in a heavily regulated sector of the economy like insurance to create new rules. Every court should be loathe to invent duties unmoored to any existing precedent. The law of unintended consequences counsels against it. A good illustration of the law of unintended consequences can be To find a good illustration of the law of unintended consequences, one need look no further than the Supreme Court's decision in Williamson County Regional Planning Comm'n v. Hamilton Bank of Johnson City, 473 U.S. 172, 105 S.Ct. 3108, 87 L.Ed.2d 126 (1985). The Court's actual holding was pedestrian: that Hamilton Bank's takings claim was unripe because the bank had not exhausted its administrative remedies, specifically its right to ask the County for a variance to develop the property in the manner proposed. In dictum, however—dictum in the sense that the Court's pronouncement was at that point unnecessary to its decision—the Court went on to say that the bank's claim was "not yet ripe" for a "second reason. That reason too was couched in terms of exhaustion: that under state law "a property owner may bring an inverse condemnation action to obtain just compensation for an alleged taking of property"; and that, until the bank "has utilized that procedure, its takings claim is premature." The Court's implicit assurance, of course, was that once a plaintiff checks these boxes, it can bring its takings claim back to federal court. That assurance proved illusory. State-court judgments are things to which the federal courts owe full faith and credit. That obligation means that takings claims litigated in state court cannot be relitigated in federal. Thus—by all appearances inadvertently— Williamson County all but guarantees that claimants will be unable to utilize the federal courts to enforce the Fifth Amendment's just compensation guarantee against state and local governments. [Lumbard v. City of Ann Arbor, 913 F.3d 585 (6th Cir. 2019)] The law of unintended consequences applies as much in jurisprudence as anywhere else; bending a rule to accommodate one litigant doesn't always achieve better justice — sometimes it just sows confusion in anyone trying to figure out what a court might do in other cases in the future. A prudent court will take the lesson to leave rulemaking to the legislators and administrators, even when the outcome appears unjust. The orderly development of the law is not without rough patches, but it is better than living under the law of unintended consequences. [United States ex rel. Prather v. Brookdale Senior Living Cmtys., Inc., 892 F.3d 822 (6th Cir. 2018)] In addition, as one dissenter said that the majority’s desire to cure all wrongs by eviscerating the doctrine of governmental immunity, while well-intentioned, is fraught with the law of unintended consequences. Depriving governmental officials of governmental immunity when making policy decisions, when making sentencing decisions, and when running the government would certainly cause most of us to rethink the traditional notion of public service. [Doe v. Dep't of Corr., 323 Mich.App. 479, 917 N.W.2d 730 (Mich. App. 2018)] Philosophers, Economists and Politicians The concept of unintended consequences is one of the building blocks of economics. Adam Smith’s “invisible hand,” the most famous metaphor in social science, is an example of a positive unintended consequence. Smith maintained that each individual, seeking only his own gain, “is led by an invisible hand to promote an end which was no part of his intention,” that end being the public interest. “It is not from the benevolence of the butcher, or the baker, that we expect our dinner,” Smith wrote, “but from regard to their own self-interest.” Most often, however, the law of unintended consequences illuminates the perverse unanticipated effects of legislation, regulation and the decisions of appellate courts. In 1692 the English philosopher John Locke, a forerunner of modern economists, urged the defeat of a parliamentary bill designed to cut the maximum permissible rate of interest from 6 percent to 4 percent. The law of unintended consequences provides the basis for many criticisms of government programs. Unintended consequences can add so much to the costs of some programs that they make the programs unwise even if they achieve their stated goals. For instance, the U.S. government-imposed quotas on imports of steel in order to protect steel companies and steelworkers from lower-priced competition. The quotas do help steel companies. But they also make less of the cheap steel available to U.S. automakers. As a result, the automakers have to pay more for steel than their foreign competitors do. So, a policy that protects one industry from foreign competition makes it harder for another industry to compete with imports. Similarly, Social Security has helped alleviate poverty among senior citizens and the disabled. Many economists argue, however, that it has carried a cost that goes beyond the payroll taxes levied on workers and employers. Martin Feldstein, and others, maintain that today’s workers save less for their old age because they know they will receive Social Security checks when they retire. If Feldstein and the others are correct, it means that less savings are available, less investment takes place, and the economy and wages grow more slowly than they would without Social Security. The law of unintended consequences is at work always and everywhere. People outraged about high prices of plywood in areas devastated by hurricanes, for example, may advocate price controls to keep the prices closer to usual levels. An unintended consequence is that suppliers of plywood from outside the region, who would have been willing to supply plywood quickly at the higher market price, are less willing to do so at the government-controlled price. Thus, a shortage of a good resulted where it was badly needed. Insurance is controlled by the courts, through appellate decisions, and by governmental agencies, through statute and regulation. Compliance with the appellate decisions, statutes, and regulations—different in the various states—is exceedingly difficult and expensive. In the United States alone, people pay insurers more than $1.2 trillion in premiums, and insurers pay out in claims and expenses as much or more than they take in. Profit margins are small because competition is fierce, and a year’s profits can be lost to a single firestorm, hurricane, or flood. (c) 2022 Barry Zalma & ClaimSchool, Inc. Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 54 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com. Subscribe to Zalma on Insurance at locals.com https://zalmaoninsurance.local.com/subscribe. Subscribe to Excellence in Claims Handling at https://barryzalma.substack.com/welcome. Write to Mr. Zalma at zalma@zalma.com; http://www.zalma.com; http://zalma.com/blog; daily articles are published at https://zalma.substack.com. Go to the podcast Zalma On Insurance at https://anchor.fm/barry-zalma; Follow Mr. Zalma on Twitter at https://twitter.com/bzalma; Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921; Go to Barry Zalma on YouTube- https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg; Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library/

The Law & the Tort of Bad Faith The law of unintended consequences is not statutory. No state or federal government has enacted it into law. No executive has signed the law. It is, rather, a law of the nature of people. It is an adage or idiomatic warning that an intervention in a complex system always creates unanticipated and often undesirable outcomes. General observation requires the hypothesis that actions of people, especially of governments, will always have effects that are unanticipated or unintended, has been proved. Economists and other social scientists have heeded its power for centuries. Regardless, for just as long, politicians, insurers and popular opinion have largely ignored the law of unintended consequences to their detriment. There is no common-law duty for a court, especially in a heavily regulated sector of the economy like insurance to create new rules. Every court should be loathe to invent duties unmoored to any existing precedent. The law of unintended consequences counsels against it. To find a good illustration of the law of unintended consequences, one need look no further than the Supreme Court's decision in Williamson County Regional Planning Comm'n v. Hamilton Bank of Johnson City, 473 U.S. 172, 105 S.Ct. 3108, 87 L.Ed.2d 126 (1985). The Court's actual holding was pedestrian: that Hamilton Bank's takings claim was unripe because the bank had not exhausted its administrative remedies, specifically its right to ask the County for a variance to develop the property in the manner proposed. In dictum, however—dictum in the sense that the Court's pronouncement was at that point unnecessary to its decision—the Court went on to say that the bank's claim was "not yet ripe" for a "second reason. That reason too was couched in terms of exhaustion: that under state law "a property owner may bring an inverse condemnation action to obtain just compensation for an alleged taking of property"; and that, until the bank "has utilized that procedure, its takings claim is premature." The Court's implicit assurance, of course, was that once a plaintiff checks these boxes, it can bring its takings claim back to federal court. That assurance proved illusory. State-court judgments are things to which the federal courts owe full faith and credit. That obligation means that takings claims litigated in state court cannot be relitigated in federal. Thus—by all appearances inadvertently— Williamson County all but guarantees that claimants will be unable to utilize the federal courts to enforce the Fifth Amendment's just compensation guarantee against state and local governments. [Lumbard v. City of Ann Arbor, 913 F.3d 585 (6th Cir. 2019)] The law of unintended consequences applies as much in jurisprudence as anywhere else; bending a rule to accommodate one litigant doesn't always achieve better justice — sometimes it just sows confusion in anyone trying to figure out what a court might do in other cases in the future. A prudent court will take the lesson to leave rulemaking to the legislators and administrators, even when the outcome appears unjust. The orderly development of the law is not without rough patches, but it is better than living under the law of unintended consequences. [United States ex rel. Prather v. Brookdale Senior Living Cmtys., Inc., 892 F.3d 822 (6th Cir. 2018)] In addition, as one dissenter said that the majority’s desire to cure all wrongs by eviscerating the doctrine of governmental immunity, while well-intentioned, is fraught with the law of unintended consequences. Depriving governmental officials of governmental immunity when making policy decisions, when making sentencing decisions, and when running the government would certainly cause most of us to rethink the traditional notion of public service. [Doe v. Dep't of Corr., 323 Mich.App. 479, 917 N.W.2d 730 (Mich. App. 2018)] Courts will often work strenuously to avoid making decisions that will result in difficulties in the future by application of the law of unintended consequences which causes more problems than the decision may cure. My opinion is that the well intentioned creation of the tort of bad faith helped one insured only to cost hundreds of millions of dollars, if not a few billion, to those unaware purchasers of insurance who must pay more in premiums than they would had the tort not been created by the California Supreme Court. Adapted from my book It’s Time to Abolish The Tort of Bad Faith (c) 2023 Barry Zalma & ClaimSchool, Inc. Subscribe and receive videos limited to subscribers of Excellence in Claims Handling at locals.com https://zalmaoninsurance.locals.com/subscribe. Consider subscribing to my publications at substack at https://barryzalma.substack.com/publish/post/107007808 Go to Newsbreak.com https://www.newsbreak.com/@c/1653419?s=01 Barry Zalma, Esq., CFE, is available at http://www.zalma.com and zalma@zalma.com Follow me on LinkedIn: www.linkedin.com/comm/mynetwork/discovery-see-all?usecase=PEOPLE_FOLLOWS&followMember=barry-zalma-esq-cfe-a6b5257 Write to Mr. Zalma at zalma@zalma.com; http://www.zalma.com; http://zalma.com/blog; daily articles are published at https://zalma.substack.com. Go to the podcast Zalma On Insurance at https://podcasters.spotify.com/pod/show/barry-zalma/support; Follow Mr. Zalma on Twitter at https://twitter.com/bzalma; Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921; Go to Barry Zalma on YouTube- https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg; https://creators.newsbreak.com/home/content/post; Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library.

Investigation of a Suspected Insurance Fraud The heart of any successful investigation of suspected insurance fraud is the insured's statement. Its importance cannot be over emphasized, and it should be recorded electronically and then transcribed. The transcribed statement should then be sent to the insured to read, correct and sign. The primary purpose of the statement is to establish and preserve the insured's version of all aspects of the loss so that it will be difficult--hopefully, impossible--for the insured to change his version or attempt to explain away the inconsistencies, discrepancies, and misrepresentations that invariably arise as your investigation proceeds. Insurers are compelled by statute and Regulation to maintain Special Fraud Investigative Units, publish and fulfill a detailed anti-fraud program and train all of their anti-fraud personnel. Compliance by insurers is less than constant across the industry. Some have effective fraud units while others simply identify one employee as their anti-fraud director although his or her work is almost totally adjusting claims and not investigating fraud. The expense of staffing and pursuing the anti-fraud efforts required by statute and regulation reduces the profits earned by the insurer and is believed to be offset by the lack of payment to fraud perpetrators. Of course, these efforts are also made difficult by the imposition of fair claims settlement practices regulations that require quick, complete, thorough investigations and fair treatment and prompt payment of insureds even when fraud is suspected. The two opposing sets of laws create a Catch-22 from which insurers find difficulty complying with both.[1] Investigation techniques including, but not limited to, interviewing, photography of loss scenes, use of independent experts, use of private investigators and use of claims counsel all are part of the required thorough investigation. Since exposing fraudulent activity, if it exists at all, is a goal of an insurance claims investigation that really wants to find a proper, honest and viable claim, accuracy is crucial. There must be no confusion about the circumstances of the loss, the items claimed, and the amount claimed--in short, all aspects of the suspected claim. It is more important to the claims person to find that the suspicious claim is, in fact, proper and remove all doubts. It is a successful claims investigation. Finding sufficient evidence of fraud to defeat a claim is important, but not as important as paying promptly a legitimate claim. Obtaining a complete statement, the first time out is preferred because second and third truthful statements become more and more difficult to get as the investigation matures. The most obvious reason for this difficulty is that the insured becomes wary or suspicious of the repeated inquiries and will be reluctant to cooperate. The professional claims person will want the investigation to be accomplished quickly so that the insured will not realize what's going on and take steps to cover his tracks. Accuracy and completeness are also essential as a process of verification necessary to ascertain whether what the insured reports and claims is, in fact, true or false. Of course, verification is accomplished by contacting the various sources of the true information, such as retailers, prior carriers, agents, adjusters, and law enforcement agencies--all of which is covered. The statement the claims person obtains may be relied on to pay a legitimate loss, to deny the claim because it was not caused by a peril insured against, to deny a claim because of attempted fraud by the insured, used as evidence to rescind the policy and/or defend against a civil suit by the insured, and because the statement itself is the most direct evidence of insurance fraud. The recorded statement may also be used in a criminal prosecution of the insured. The importance of the statement and the requirement that it be meticulously performed and transcribed is important and essential to each claims investigation. [1] For detail consider Barry Zalma’s book California SIU Regulations 2020 available on amazon.com. (c) 2023 Barry Zalma & ClaimSchool, Inc. Subscribe and receive videos limited to subscribers of Excellence in Claims Handling at locals.com https://zalmaoninsurance.locals.com/subscribe. Consider subscribing to my publications at substack at https://barryzalma.substack.com/publish/post/107007808 Go to Newsbreak.com https://www.newsbreak.com/@c/1653419?s=01 Barry Zalma, Esq., CFE, is available at http://www.zalma.com and zalma@zalma.com Follow me on LinkedIn: www.linkedin.com/comm/mynetwork/discovery-see-all?usecase=PEOPLE_FOLLOWS&followMember=barry-zalma-esq-cfe-a6b5257 Write to Mr. Zalma at zalma@zalma.com; http://www.zalma.com; http://zalma.com/blog; daily articles are published at https://zalma.substack.com. Go to the podcast Zalma On Insurance at https://podcasters.spotify.com/pod/show/barry-zalma/support; Follow Mr. Zalma on Twitter at https://twitter.com/bzalma; Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921; Go to Barry Zalma on YouTube- https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg; https://creators.newsbreak.com/home/content/post; Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library.

Nebraska Valued Policy Fails Insureds Mark and Michelle Callahan sued their insurer and its agent, seeking to recover damages after their home was destroyed in a fire. The district court granted summary judgment in favor of the insurer and its agent and the Callahans appealed. In Mark and Michelle Callahan v. Jeb Brant, an individual, and Shelter Mutual Insurance Company, 314 Neb. 219, No. S-21-1006, Supreme Court of Nebraska (May 12, 2023) the Supreme Court concluded the valued policy statute established the value of the property at the time of a total loss. FACTUAL BACKGROUND In 2011, the Callahans purchased a Shelter Mutual Insurance Company (Shelter) homeowners insurance policy through a licensed insurance producer, Jeb Brant. Before the policy was issued, Brant used a reconstruction cost calculator tool to estimate the cost of rebuilding the Callahans' home, using information obtained from the Callahans and from the Clay County assessor's website. Brant prepared a report that estimated reconstruction costs at $250,481. In May 2019, the parties agree the Callahans' home was totally destroyed by an electrical fire. The Callahans submitted a claim on the policy with Brant's assistance, and it is undisputed that Shelter subsequently paid the Callahans all amounts due and owing under the policy. The Callahans allege that when they subsequently obtained a quote for the cost of rebuilding their home, they learned "the cost to rebuild was substantially higher than the amount of insurance coverage." The Callahans sued Shelter and Brant. They alleged that Brant negligently advised them on the estimated replacement value of their home and negligently misrepresented the adequacy of their policy limits in the event of a total loss. The declarations page of the policy states the Callahans' home was insured in the amount of $267,400, and the policy contained a "Valued Policy" provision. Shelter and Brant generally relied on the language of the policy, as well as on Nebraska case law regarding the duty of insureds and insurance agents, to argue that it was the Callahans' duty to know the value of the property they were insuring and to request the amount of insurance coverage they desired. Shelter and Brant argued that the policy limit on the home was unambiguously stated in the policy and represented the full measure of the Callahans' damages in the event of a total loss. The district court granted summary judgment in favor of Shelter and Brant. ANALYSIS Nebraska law on this issue is well settled. When an insured asks an insurance agent to procure insurance, it is the duty of the insured to advise the insurance agent as to the desired insurance, including the limits of the policy to be issued. An insurance agent has no duty to anticipate what coverage an insured should have. The Callahans conceded they never asked Brant to procure coverage in a higher amount on their home. They specifically argued they "would have increased their policy limits if Brant had advised them that they needed more coverage to replace their home in the event of a total loss." Nebraska's valued policy statute conclusively established the true value of the Callahans' loss in the event the property is wholly destroyed, and it precludes them from offering evidence that the true value was something other than the amount for which the home was insured. Nebraska's Valued Policy Statute Nebraska's valued policy statute is currently codified at Neb. Rev. Stat. § 44-501.02 (Reissue 2021). The valued policy statute conclusively fixes the true value of insured property at the valuation written in the policy, and when there is a total loss, that sum is the measure of recovery. The valued policy statute is required to be part of every fire policy issued in this state, and the statutory language was expressly incorporated into the Shelter policy issued to the Callahans. Neither the language of the valued policy statute, nor the public policy objectives underpinning that statute, provide a principled basis to restrict application of the conclusive determination of true value only to circumstances when an insurer seeks to pay less than the policy limits because of a misrepresentation, and not to circumstances when an insured seeks to recover more than the policy limits because of a misrepresentation. Under either scenario, after a total loss, the valued policy statute conclusively fixes the true value of the insured property at the amount stated in the policy. The Supreme Court concluded that the "valued policy statute applies to the Callahans' misrepresentation claim against Shelter and Brant, and it conclusively establishes that the true value of the Callahans' home is $267,400-the amount for which it was insured. Moreover, it precludes the Callahans from offering evidence that the true value of their home was something other than the amount for which it was insured. And without such evidence, the Callahans cannot prevail on their negligence or negligent misrepresentation claims." Nebraska's valued policy statute conclusively determines that the true value of the insured property is the amount written in the policy. The district court did not err in granting summary judgment in favor of Shelter and Brant, and the judgment was affirmed. ZALMA OPINION Setting a replacement value of a home for the purposes of homeowners insurance is - much to the surprise of those insured - the obligation of the person seeking insurance not the insurer or the insurance agent. The Nebraska valued property statute was designed to protect insurers and agents against the type of claim brought by the Callahans'. Every person insured should take their chances and rely on the estimates prepared by the agent or seek the advice of a professional fire reconstruction contractor to provide an estimate. With inflation most estimates made last year are out of date. Be careful. (c) 2023 Barry Zalma & ClaimSchool, Inc. Subscribe and receive videos limited to subscribers of Excellence in Claims Handling at locals.com https://zalmaoninsurance.locals.com/subscribe. Consider subscribing to my publications at substack at https://barryzalma.substack.com/publish/post/107007808 Go to Newsbreak.com https://www.newsbreak.com/@c/1653419?s=01 Barry Zalma, Esq., CFE, is available at http://www.zalma.com and zalma@zalma.com Follow me on LinkedIn: www.linkedin.com/comm/mynetwork/discovery-see-all?usecase=PEOPLE_FOLLOWS&followMember=barry-zalma-esq-cfe-a6b5257 Write to Mr. Zalma at zalma@zalma.com; http://www.zalma.com; http://zalma.com/blog; daily articles are published at https://zalma.substack.com. Go to the podcast Zalma On Insurance at https://podcasters.spotify.com/pod/show/barry-zalma/support; Follow Mr. Zalma on Twitter at https://twitter.com/bzalma; Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921; Go to Barry Zalma on YouTube- https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg; https://creators.newsbreak.com/home/content/post; Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library.

Criminals Take Advantage of Government Health Care New Statute Requires Sentencing Review In The People v. Howard Oliver, B317368, California Court of Appeals, Second District, Third Division (May 12, 2023) Howard Oliver appealed from the judgment entered after a jury convicted him of conspiracy to cheat and defraud Medi-Cal, Medi-Cal fraud; grand theft, false and fraudulent claims, insurance fraud, and four counts of tax evasion for 2012 through 2015. Oliver was sentenced to an aggregate sentence of seven years eight months in prison and ordered to pay over $2.85 million in restitution. BACKGROUND In 1997, Oliver hired accountant Lou Cannon to assist with taxes and bookkeeping for his business, Central Desert Industrial Medical Group (Central Desert), an Apple Valley medical clinic which provided medical care to injured workers. Cannon eventually learned that Oliver was also the director of lucrative alcohol and drug counseling centers and became interested in operating one. Oliver counseled her on starting a facility, providing her information and documentation to submit with the relevant applications, and loaned her funds to start the facility. In 2008, Cannon opened West Coast Counseling Center (West Coast) in Long Beach, designating herself as the executive director and Oliver the medical director. Oliver provided his medical license and advised Cannon as to which office to rent, informing her an examination room was not necessary. West Coast's Falsification Of Patient Records West Coast's business was based on billing Medi-Cal. Cannon handled the billing, payroll, and accounting. Oliver served as medical director, signing off on files, plans, and billing. He received a salary of $1,500 per month, which later increased to $2,500 per month. Cannon directed counselors to fill in incomplete intake forms with false information and input progress notes in files of patients who the counselors never counseled. To accomplish this, approximately twice per month, Bailey gave counselors patient names and dates so they could prepare false progress notes in the files. Oliver visited the office once or twice per month to review files, sign them, and return them to counselors. Oliver signed a physical examination waiver for clients. Bailey also instructed the counselors to list group sessions as lasting three hours, even though no sessions went that long. If counselors failed to do so, their pay checks would be withheld until "necessary corrections" to the entries were made. Counselors complained about the falsification of records during a staff meeting with Cannon, Bailey, Oliver, and Moreno. Oliver said to Bailey, "You need to stop doing that with the staff." The counselors were asked to leave the meeting room. After the meeting, Oliver continued to sign off on patient visits that had not occurred. West Coast was doing well financially. West Coast also began offering incentives to encourage Medi-Cal recipients to come into their office and provide their Medi-Cal card in exchange for vouchers for food, clothes, and transportation. Department Of Justice Investigation The Department of Justice investigative auditor assigned to investigate West Coast determined that Medi-Cal paid West Coast approximately $2.8 million between January 2010 and September 2013, approximately half of which was for one-on-one counseling for three hours per day three days per week. The investigation revealed that Oliver had deposited several hundred thousand dollars’ worth of checks into the Central Desert and/or Grove Medical accounts that went unreported on Central Desert's tax returns. Central Desert failed to pay $203,744 in taxes over four years. DISCUSSION The Trial Court's Denial Of Oliver's Mistrial Request Was Not Erroneous The evidence of Oliver's knowledge that the documents he was signing contained false information was overwhelming, and Oliver's contrary arguments are unavailing. The Court concluded that the trial court did not err in denying a mistrial. Assembly Bill No. 518 Requires Re-sentencing Assembly Bill No. 518, which took effect on January 1, 2022 (days after Oliver's December 7, 2021 sentencing), amended section 654 to provide, in pertinent part: "An act or omission that is punishable in different ways by different provisions of law may be punished under either of such provisions, but in no case shall the act or omission be punished under more than one provision." A trial court must exercise its informed discretion when sentencing a defendant. Oliver was convicted of five counts related to Medi-Cal fraud and four counts related to tax evasion. Under the former statute, the trial court was required to impose the longer sentence for count 2 and to stay the sentences for counts 1, 3, 4, and 6 because, as the trial court recognized, those five counts arose out of "essentially all the same course of action." Under the amended statute, the trial court had discretion to sentence Oliver under one of the less severe provisions and stay sentences on the other counts arising out of the same acts and omissions. Howard Oliver's sentence was vacated and the case was remanded to the trial court for re-sentencing. In all other respects, the judgment was affirmed. ZALMA OPINION Defrauding the state and federal governments is a serious crime. Oliver did so with impunity for a payment of $2500 a month plus whatever he could steal from the business and by lying on his tax returns. He was properly convicted of the crimes and sentenced appropriately. Hopefully, although I hold out little hope, when the sentence is looked at again the trial court will exercise its discretion and keep or make longer the sentence Oliver must serve. (c) 2023 Barry Zalma & ClaimSchool, Inc. Subscribe and receive videos limited to subscribers of Excellence in Claims Handling at locals.com https://zalmaoninsurance.locals.com/subscribe. Consider subscribing to my publications at substack at https://barryzalma.substack.com/publish/post/107007808 Go to Newsbreak.com https://www.newsbreak.com/@c/1653419?s=01 Barry Zalma, Esq., CFE, is available at http://www.zalma.com and zalma@zalma.com Follow me on LinkedIn: www.linkedin.com/comm/mynetwork/discovery-see-all?usecase=PEOPLE_FOLLOWS&followMember=barry-zalma-esq-cfe-a6b5257 Write to Mr. Zalma at zalma@zalma.com; http://www.zalma.com; http://zalma.com/blog; daily articles are published at https://zalma.substack.com. Go to the podcast Zalma On Insurance at https://podcasters.spotify.com/pod/show/barry-zalma/support; Follow Mr. Zalma on Twitter at https://twitter.com/bzalma; Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921; Go to Barry Zalma on YouTube- https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg; https://creators.newsbreak.com/home/content/post; Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library.

An Attempt to Profit from Arson Fails See the full video at and at https://youtu.be/xXCaz2ZbuDU This is a fictionalized true crime story of insurance fraud from an expert who explains why insurance fraud is a “Heads I Win, Tails You Lose” situation for Insurers. It Takes Skill to use Arson to Defraud an Insurer Most people do not understand how hard it is to set fire to a house that will destroy the entire dwelling and its contents. Most residences simply do not have sufficient combustibles in the right place to allow for a sustained fire. Many homes, especially the more modern ones, have fail-safe devices everywhere that make accidental fires a thing of the past. An Insured decided that the only possible means of escaping his mortgage was to burn down his house. Being a rather imaginative fellow, he decided to also make the fire look like an accident. On leaving his house in the afternoon, he opened the gas jets on the stove, blew out the pilot on his gas dryer and water heater, and set the thermostat on his electronically ignited furnace to 80 degrees Fahrenheit. It was a hot Summer day, but he assumed it would eventually cool off a little, the thermostat would kick on the furnace, and the electronic starter would cause a gas explosion that would destroy the entire house. What he did not count on was Southern California’s Santa Ana Winds that brought heat from the desert and kept the outside temperature in the hundreds all day and into the night. The Insured was shocked that a nosey neighbor with clear sinuses would smell the gas, turn it off at the meter, and save the house. Of course, when the Insured returned home, he had to hide his disappointment that the house was still there. Undaunted, however, he tried again the next week. This time he took no chances. He went to the hardware store and bought a case of Coleman cooking fuel and spread it throughout the house. Then he tore up a book of paper matches so that there was no cover, only matches. He lit a cigarette and placed it low between the matches and left the house confident that when the cigarette burned down it would ignite the match heads and burn down the house. He was again sorely disappointed when he returned home to find the house still there. The would-be arsonist had his innocent wife with him as an alibi. When they entered the house, she became hysterical at the sight of the flammable liquids poured throughout the house. She insisted that he report the incident to the fire department. He wouldn’t do it so she, against his wishes, called in the Arson Investigators. “Boy, you were lucky.” A young fire arson unit investigator said. “The idiot who tried to set fire to your house set his fuse upside down!” Immediately, his partner kicked him in the shins but it was too late to stop him. The fact that the cigarette, to be used as a fuse, must be placed at the head of the matches, not the base, was not known to the insured and the cigarette merely burned itself out. The Insured learned a lesson from the arson investigator. The house burned down almost totally two days later. The claim to the insurer included, among many other things, one encyclopedia Britannica and a wooden duck decoy. These inconsequential items, making up part of a claim for more than $100,000.00 in personal property, led to the Insured’s arrest when they were found, intact and undamaged in his temporary residence. The Insured was arrested for arson and insurance fraud. His claim was denied. He, of course, sued for bad faith, and the insurer was required to defend the law suit for a total of five years because it could not compel his testimony at deposition or trial until his criminal case was resolved. In the fifth year of the bad faith suit the insured’s lawyer called the insurer’s lawyer and suggested his client would provide a release and dismiss the suit with prejudice for a payment of only $5,000. The adjuster in charge – although he had spent over $30,000 defending the suit, refused the settlement and instructed his lawyer to offer only $2,000. Following instructions, the insulting offer was made and, much to the surprise of the defense lawyer, the offer was accepted. The suit finally settled with the arsonist and his presumably innocent spouse, for a payment of $2,000.00. Twenty times less than that amount expended by the insurer to defend the spurious lawsuit brought by the Insured. Why did the Insured offer to settle for so little? For at least two reasons: Because the District Attorney could not set a man free to try the arson case and it was continued over and over again until all the witnesses were gone or had forgotten everything they knew. Because the District Attorney and the Insured had made a deal that if the Insured pleaded guilty to one count of insurance fraud he would not go to jail. The District Attorney, although he knew of the insurer’s interest in the case and the lawsuit pending against it did not advise the insurer of the deal. Of course, had the insurer known that the insured was going to plead guilty to insurance fraud they would have paid nothing. The case was never tried. Two days after the settlement was paid in the civil action and more than five years after the fire, the Insured appeared in criminal court and pleaded guilty to one count of insurance fraud. He was given probation. The case wasn’t a priority matter to the prosecutor since only an insurance company was being hurt. The fact that the insurer was required to defend a bad faith suit for five years at enormous cost was of no apparent concern to the prosecutors. The Insured did not profit from the fire with a cash award. He was relieved of his mortgage debt [which the insurer was required to pay to the mortgagee who had not been culpable in the arson] and he paid his lawyer one third of the $2,000 settlement. Since the insured was judgment proof the insurer lost, as uncollectable, the amount paid to the mortgagee and sold the bare land. Interestingly, the arson investigator who worked so hard to find evidence to arrest the insured was later arrested and convicted as a serial arsonist. Apparently, he was upset that there was an arson fire in his town that he did not set. Adapted from my book Insurance Fraud Costs Everyone (c) 2023 Barry Zalma & ClaimSchool, Inc. Subscribe and receive videos limited to subscribers of Excellence in Claims Handling at locals.com https://zalmaoninsurance.locals.com/subscribe. Consider subscribing to my publications at substack at https://barryzalma.substack.com/publish/post/107007808 Go to Newsbreak.com https://www.newsbreak.com/@c/1653419?s=01 Barry Zalma, Esq., CFE, is available at http://www.zalma.com and zalma@zalma.com Follow me on LinkedIn: www.linkedin.com/comm/mynetwork/discovery-see-all?usecase=PEOPLE_FOLLOWS&followMember=barry-zalma-esq-cfe-a6b5257 Write to Mr. Zalma at zalma@zalma.com; http://www.zalma.com; http://zalma.com/blog; daily articles are published at https://zalma.substack.com. Go to the podcast Zalma On Insurance at https://podcasters.spotify.com/pod/show/barry-zalma/support; Follow Mr. Zalma on Twitter at https://twitter.com/bzalma; Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921; Go to Barry Zalma on YouTube- https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg; https://creators.newsbreak.com/home/content/post; Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library.

Criminals Take Advantage of Government Health Care New Statute Requires Sentencing Review In The People v. Howard Oliver, B317368, California Court of Appeals, Second District, Third Division (May 12, 2023) Howard Oliver appealed from the judgment entered after a jury convicted him of conspiracy to cheat and defraud Medi-Cal, Medi-Cal fraud; grand theft, false and fraudulent claims, insurance fraud, and four counts of tax evasion for 2012 through 2015. Oliver was sentenced to an aggregate sentence of seven years eight months in prison and ordered to pay over $2.85 million in restitution. BACKGROUND In 1997, Oliver hired accountant Lou Cannon to assist with taxes and bookkeeping for his business, Central Desert Industrial Medical Group (Central Desert), an Apple Valley medical clinic which provided medical care to injured workers. Cannon eventually learned that Oliver was also the director of lucrative alcohol and drug counseling centers and became interested in operating one. Oliver counseled her on starting a facility, providing her information and documentation to submit with the relevant applications, and loaned her funds to start the facility. In 2008, Cannon opened West Coast Counseling Center (West Coast) in Long Beach, designating herself as the executive director and Oliver the medical director. Oliver provided his medical license and advised Cannon as to which office to rent, informing her an examination room was not necessary. West Coast's Falsification Of Patient Records West Coast's business was based on billing Medi-Cal. Cannon handled the billing, payroll, and accounting. Oliver served as medical director, signing off on files, plans, and billing. He received a salary of $1,500 per month, which later increased to $2,500 per month. Cannon directed counselors to fill in incomplete intake forms with false information and input progress notes in files of patients who the counselors never counseled. To accomplish this, approximately twice per month, Bailey gave counselors patient names and dates so they could prepare false progress notes in the files. Oliver visited the office once or twice per month to review files, sign them, and return them to counselors. Oliver signed a physical examination waiver for clients. Bailey also instructed the counselors to list group sessions as lasting three hours, even though no sessions went that long. If counselors failed to do so, their pay checks would be withheld until "necessary corrections" to the entries were made. Counselors complained about the falsification of records during a staff meeting with Cannon, Bailey, Oliver, and Moreno. Oliver said to Bailey, "You need to stop doing that with the staff." The counselors were asked to leave the meeting room. After the meeting, Oliver continued to sign off on patient visits that had not occurred. West Coast was doing well financially. West Coast also began offering incentives to encourage Medi-Cal recipients to come into their office and provide their Medi-Cal card in exchange for vouchers for food, clothes, and transportation. Department Of Justice Investigation The Department of Justice investigative auditor assigned to investigate West Coast determined that Medi-Cal paid West Coast approximately $2.8 million between January 2010 and September 2013, approximately half of which was for one-on-one counseling for three hours per day three days per week. The investigation revealed that Oliver had deposited several hundred thousand dollars’ worth of checks into the Central Desert and/or Grove Medical accounts that went unreported on Central Desert's tax returns. Central Desert failed to pay $203,744 in taxes over four years. DISCUSSION The Trial Court's Denial Of Oliver's Mistrial Request Was Not Erroneous The evidence of Oliver's knowledge that the documents he was signing contained false information was overwhelming, and Oliver's contrary arguments are unavailing. The Court concluded that the trial court did not err in denying a mistrial. Assembly Bill No. 518 Requires Re-sentencing Assembly Bill No. 518, which took effect on January 1, 2022 (days after Oliver's December 7, 2021 sentencing), amended section 654 to provide, in pertinent part: "An act or omission that is punishable in different ways by different provisions of law may be punished under either of such provisions, but in no case shall the act or omission be punished under more than one provision." A trial court must exercise its informed discretion when sentencing a defendant. Oliver was convicted of five counts related to Medi-Cal fraud and four counts related to tax evasion. Under the former statute, the trial court was required to impose the longer sentence for count 2 and to stay the sentences for counts 1, 3, 4, and 6 because, as the trial court recognized, those five counts arose out of "essentially all the same course of action." Under the amended statute, the trial court had discretion to sentence Oliver under one of the less severe provisions and stay sentences on the other counts arising out of the same acts and omissions. Howard Oliver's sentence was vacated and the case was remanded to the trial court for re-sentencing. In all other respects, the judgment was affirmed. ZALMA OPINION Defrauding the state and federal governments is a serious crime. Oliver did so with impunity for a payment of $2500 a month plus whatever he could steal from the business and by lying on his tax returns. He was properly convicted of the crimes and sentenced appropriately. Hopefully, although I hold out little hope, when the sentence is looked at again the trial court will exercise its discretion and keep or make longer the sentence Oliver must serve. (c) 2023 Barry Zalma & ClaimSchool, Inc. Subscribe and receive videos limited to subscribers of Excellence in Claims Handling at locals.com https://zalmaoninsurance.locals.com/subscribe. Consider subscribing to my publications at substack at https://barryzalma.substack.com/publish/post/107007808 Go to Newsbreak.com https://www.newsbreak.com/@c/1653419?s=01 Barry Zalma, Esq., CFE, is available at http://www.zalma.com and zalma@zalma.com Follow me on LinkedIn: www.linkedin.com/comm/mynetwork/discovery-see-all?usecase=PEOPLE_FOLLOWS&followMember=barry-zalma-esq-cfe-a6b5257 Write to Mr. Zalma at zalma@zalma.com; http://www.zalma.com; http://zalma.com/blog; daily articles are published at https://zalma.substack.com. Go to the podcast Zalma On Insurance at https://podcasters.spotify.com/pod/show/barry-zalma/support; Follow Mr. Zalma on Twitter at https://twitter.com/bzalma; Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921; Go to Barry Zalma on YouTube- https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg; https://creators.newsbreak.com/home/content/post; Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library.

Employers' Liability Policy Only Covers Accidental Injury In Graphic Packaging International, LLC v. Everest National Insurance Company, No. N22C-03-192 AML CCLD, Superior Court of Delaware (May 8, 2023) the plaintiff sought coverage under an employers' liability insurance policy for losses the plaintiff incurred litigating and settling a workplace injury action filed by its employee. The insurance policy provided coverage only for "bodily injury by accident." In the underlying litigation, the employer faced a claim that it knowingly engaged in conduct that was substantially certain to injure its employee. The employer settled the underlying litigation shortly before trial, and the insurance company denied coverage for the settlement on the basis that the litigation involved a claim for intentional tortious conduct, rather than a claim for an accidental injury within the scope of the policy's coverage. Under settled Texas law, Texas's workers' compensation law when the employer commits an intentional tort the exclusive remedy does not apply. Accordingly, the only claim the employee brought in the underlying litigation was that the employer's conduct "[rose] to the level of an intentional tort." FACTUAL BACKGROUND Plaintiff Graphic Packaging International ("Graphic") or ("GPHC") makes sustainable paper-based packaging solutions for a variety of food, beverage, food-service, and other consumer products companies. GPHC's primary insurer, Arch Insurance Company ("Arch"), issued a Workers' Compensation and Employers' Liability policy to GPHC and Graphic (the "Arch Policy"). The Arch Policy contained a $1 million per occurrence limit and provided two separate coverages. In Part One, the Arch Policy insured Graphic's obligations under state workers' compensation laws. In Part Two, the Arch Policy insured Graphic for employee injury claims outside of workers' compensation. Everest National Insurance Company ("Everest") provided a Commercial Umbrella Liability Policy to GPHC and its subsidiaries, including Graphic (the "Everest Policy"). The Everest Policy contained a $25 million per occurrence coverage limit in excess of the Arch Policy. The Arch Policy (which Everest followed) excluded coverage for "bodily injury intentionally caused or aggravated by [Graphic]." The Crompton Action Montgomery Crompton ("Mr. Crompton"), a Graphic employee, sustained an injury while working at a Graphic paper mill in Texas. During steam production, it was important that a sudden intense release of steam, known as a "blowdown," occur. In July 2018, a hole developed in the blowdown header, requiring placement of a temporary steel patch until the mill could be shut down for repairs. Graphic knew the safest way to repair the blowdown header was to shut down the production process, but Graphic instead ordered Mr. Crompton to manually perform the steel patch. When Mr. Crompton started the repair he noticed hot water leaking from the hole in the header and told his supervisor he was concerned for his safety. Mr. Crompton returned to the blowdown header, and while he was working on the steel patch, a blowdown occurred, covering him in scalding steam that severely burned him. The Texas Workers' Compensation Act ("TWCA") controls the relationship and conduct between an employee who is injured in the course and scope of his employment and an employer who has workers' compensation insurance. When an employer commits an intentional tort, a common-law exception exists to the otherwise exclusive remedy created by the TWCA. Mr. Crompton and his wife ("The Cromptons") sued Graphic in (the "Crompton Action"), alleging "the conduct of [Graphic] rises to the level of an intentional tort; specifically, [Graphic] had knowledge to a substantial certainty that its conduct would bring about harm to Crompton." Arch, as Graphic's primary insurer, defended Graphic in the Crompton Action. Arch offered to tender its $1 million employers' liability limit to Everest to use to attempt to settle the Crompton Action. Everest rejected Arch's tender because Everest "continue[d] to believe that no coverage exist[ed] for any liability Graphic may face in the pending suit." The parties in the Crompton Action participated in a settlement conference on January 18, 2022. During that conference, the Cromptons reduced their demands, and Arch reiterated that its entire $1 million policy limit could be used by Everest and Graphic to settle the case. Everest refused to give Graphic authority to use any portion of the Everest Policy to settle the Crompton Action. The Cromptons also accepted the mediator's proposal, and Graphic paid the portion of the settlement in excess of Arch's policy limit. This Coverage Action Graphic sued Everest for failure to cover the Crompton Action, seeking to recover the amount Graphic paid to settle the Cromptons' claims. Everest successfully moved for judgment on the pleadings. ANALYSIS The Court concluded that it is clear as a matter of law that the Crompton Action did not fall within the scope of Everest's coverage obligation. Graphic, as the insured, had the burden of proving it is entitled to coverage under the terms of the Everest Policy. The Everest Policy's insuring agreement, incorporated from the underlying Arch Policy, states: “Bodily injury caused by intentional tortious conduct is different from bodily injury caused ‘by accident.’ Courts interpret the term ‘accident’ in an insurance policy to mean ‘an event which takes place without one's foresight or expectation or design.’” The controlling Texas law is that only a "substantially certain" intentional injury could have made Graphic liable in the Crompton Action. The Cromptons alleged in their complaint that Graphic knew or believed its actions would injure Mr. Crompton. That claim does not, and cannot be construed to, fall within the policy's coverage for "bodily injury by accident." The Cromptons could prevail only if they proved Graphic, through McCright, intended to injure Mr. Crompton. At the time of the settlement, therefore, Graphic was facing only an intentional tort claim. Intentional torts fall outside the scope of the policy's coverage for accidental injury and therefore the Cromptons' claim against Graphic does not fall within the Everest Policy's scope of coverage. ZALMA OPINION Since the only way the Cromptons could succeed is to prove that Graphic intended to harm Mr. Crompton and, as a result, there was no possibility that Everest could owe indemnity to Graphic. Since Everest followed form with Arch Graphic should have been happy that Arch offered up its limits. (c) 2023 Barry Zalma & ClaimSchool, Inc. Subscribe and receive videos limited to subscribers of Excellence in Claims Handling at locals.com https://zalmaoninsurance.locals.com/subscribe. Consider subscribing to my publications at substack at https://barryzalma.substack.com/publish/post/107007808 Go to Newsbreak.com https://www.newsbreak.com/@c/1653419?s=01 Barry Zalma, Esq., CFE, is available at http://www.zalma.com and zalma@zalma.com Follow me on LinkedIn: www.linkedin.com/comm/mynetwork/discovery-see-all?usecase=PEOPLE_FOLLOWS&followMember=barry-zalma-esq-cfe-a6b5257 Write to Mr. Zalma at zalma@zalma.com; http://www.zalma.com; http://zalma.com/blog; daily articles are published at https://zalma.substack.com. Go to the podcast Zalma On Insurance at https://podcasters.spotify.com/pod/show/barry-zalma/support; Follow Mr. Zalma on Twitter at https://twitter.com/bzalma; Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921; Go to Barry Zalma on YouTube- https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg; https://creators.newsbreak.com/home/content/post; Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library.

Broker Different Than Agent and Insurer Knockerball MidMo, LLC ("Knockerball") appealed from the judgment of the trial court granting McGowan &Company, Inc.'s ("McGowan") motion for summary judgment on Knockerball's claims for negligence and breach of fiduciary duties. In Knockerball Midmo, LLC v. Mcgowan & Company, Inc. d/b/a McGowan Excess & Casualty, No. WD85458, Court of Appeals of Missouri, Western District, Fourth Division (May 9, 2023) the Court of Appeals resolved the dispute. BACKGROUND McGowan, in its capacity as Knockerball's insurance broker, and Sportsinsurance, in its capacity as managing general agent for Liability Insurer, assisted in procuring general liability insurance coverage for Knockerball in the amount of $1 million and the liability insurance policy covered the time period when Hart was severely injured on Knockerball's premises. Hart sued Knockerball for personal injuries (the "Underlying Suit"). Knockerball was served and promptly notified McGowan of the Underlying Suit and provided a copy of the petition to McGowan. McGowan's representative assured Knockerball's managing member that McGowan would "handle it." However, through a variety of missteps by McGowan, Sportsinsurance, and Liability Insurer, no responsive pleading was timely filed on behalf of Knockerball and an order of interlocutory default against Knockerball was entered in the Underlying Suit on March 31, 2017. Knockerball then entered into an agreement with Hart that contained the following provisions: Hart and Knockerball and for the consideration of TEN DOLLARS ($10.00) provided to Hart this day by Knockerball agreed to settle and assign rights against broker and insurer. Thereafter, a bench trial on damages was held on July 11, 2017, at which Knockerball did not cross-examine witnesses or object to the evidence Hart's attorney offered. On July 13, 2017, the court in the Underlying Suit entered a Final Judgment for Hart against Knockerball in the amount of $44,631,268.99 with interest at the rate of 6.16 percent. It is undisputed that Knockerball did not incur any attorney's fees for the defense of the Underlying Suit. And Hart is prohibited from attempting to collect any portion of the judgment in the Underlying Suit against Knockerball or Knockerball's managing member. The trial court found that it was undisputed that not only was Knockerball protected from liability on Hart's claims but it also stood to collect in excess of $1 million as a result of the resolution of actual coverage claims, therefore it was difficult to see how Knockerball has been damaged and that such damage was proximately caused by McGowan's conduct. ANALYSIS This case is not a "bad faith refusal to settle" case against a liability insurer or that insurer's general agent. Simply put, there is a difference between an insurance broker such as McGowan and a general agent for the insurer (i.e., Sportsinsurance). While an agent represents the insurer, an insurance broker, unless otherwise authorized and provided, represents the insured and, unless otherwise shown by the evidence, is to be regarded as the agent of the insured. Knockerball's claims against McGowan are for negligence. The circuit court granted summary judgment in favor of the insurance broker, and the insured appealed, asserting that the trial court erred in concluding that the insured sustained no damages resulting from the insurance broker's failure to procure adequate insurance coverage. The judgment in the Underlying Suit was entered after Hart agreed that he would not levy execution by garnishment or otherwise provided by law, or otherwise collect or attempt to collect on any property, asset, or right of Knockerball for any portion of the Judgment entered against it in the Underlying Suit. Instead of Knockerball suffering damages from a $44 million default judgment in the Underlying Suit, it actually received $1.25 million from Liability Insurer's settlement of Hart's claims against Liability Insurer. Knockerball actually profited from its own business premises negligence due to the corresponding settlement of Hart's coverage and bad faith claims. The Court of Appeals concluded that Knockerball has not been damaged as a result of the judgment entered against it in the Underlying Suit. Knockerball has not established that it sustained pecuniary damage as a result of McGowan's alleged negligence and breach of fiduciary duties to Knockerball as Knockerball's insurance broker. Without damages, the trial court's summary judgment ruling is not erroneous, and Knockerball's appeal is without merit. ZALMA OPINION Although the broker was negligent in not immediately forwarding the notice of the suit to the insurer the resulting actions of the insured and the plaintiff to allow action against the insurer and the brokers resulted in Knockerball incurring no damages but, in fact, profiting from the situation. This part of the case was, in my opinion, a waste of judicial time. (c) 2023 Barry Zalma & ClaimSchool, Inc. Subscribe and receive videos limited to subscribers of Excellence in Claims Handling at locals.com https://zalmaoninsurance.locals.com/subscribe. Consider subscribing to my publications at substack at https://barryzalma.substack.com/publish/post/107007808 Go to Newsbreak.com https://www.newsbreak.com/@c/1653419?s=01 Barry Zalma, Esq., CFE, is available at http://www.zalma.com and zalma@zalma.com Follow me on LinkedIn: www.linkedin.com/comm/mynetwork/discovery-see-all?usecase=PEOPLE_FOLLOWS&followMember=barry-zalma-esq-cfe-a6b5257 Write to Mr. Zalma at zalma@zalma.com; http://www.zalma.com; http://zalma.com/blog; daily articles are published at https://zalma.substack.com. Go to the podcast Zalma On Insurance at https://podcasters.spotify.com/pod/show/barry-zalma/support; Follow Mr. Zalma on Twitter at https://twitter.com/bzalma; Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921; Go to Barry Zalma on YouTube- https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg; https://creators.newsbreak.com/home/content/post; Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library.

ZIFL - 05/15/2023 - Volume 27, Issue 10 The Source For Insurance Fraud Professionals Issue Number 10 of the 27th year of publication of Zalma's Insurance Fraud Letter provides in Adobe pdf format including the following articles. You can read the full 20 page issue at http://zalma.com/blog/wp-content/uploads/2023/05/ZIFL-05-15-2023.pdf Millions for Defense: Not a Dime for Tribute Staged Accident Eliminates Coverage In a no-fault auto insurance matter brought in New York, State Farm Fire and Casualty Company, as the plaintiff insurer established prima facie entitlement to summary judgment by: submitting the examination under oath transcript of defendant insured Lesie Merle, in which she testified that she primarily garaged the car involved in the accident in Far Rockaway, New York, rather than in Connecticut; the affidavit of its underwriter Christina Ardito, who establishes that such misrepresentation to plaintiff of the car’s location was material. You can read the full 20 page issue at http://zalma.com/blog/wp-content/uploads/2023/05/ZIFL-05-15-2023.pdf More McClenny Moseley & Associates Issues This is ZIFL’s sixth installment of the saga of McClenny, Moseley & Associates and its problems with the federal courts in the State of Louisiana and what appears to be an effort to profit from what some Magistrate and District judges indicate may be criminal conduct to profit from insurance claims relating to hurricane damage to the public of the state of Louisiana. You can read the full 20 page issue at http://zalma.com/blog/wp-content/uploads/2023/05/ZIFL-05-15-2023.pdf Prison for 195 Years Arson Investigators May Testify as Experts as to Cause and Origin of Fire Following NFPA Guidelines Establishes Expertise Defendant, Todd N. Perkins, appealed twenty-eight criminal convictions stemming from a jury’s verdict finding that he intentionally caused a building explosion. He challenged the trial court’s denial of a hearing to determine the reliability of the bases for the arson investigators’ opinions. In The People of the State of Colorado v. Todd N. Perkins, No. 20CA0882, 2023 COA 38, Court of Appeals of Colorado, Division A (May 4, 2023) the Court of Appeals dealt with claims of incompetent fire cause experts. You can read the full 20 page issue at http://zalma.com/blog/wp-content/uploads/2023/05/ZIFL-05-15-2023.pdf Good News From the Dam Ngoc Luong ran her own temporary workers agency and found out that, though her workers were temporary, insurance fraud is not. The Dorchester woman is now pleading guilty to a host of fraud charges. Prosecutors allege: From 2015 through 2019, Luong owned and operated Four Seasons Temp, Inc. When collecting payments from her temporary employment agency business clients, Luong cashed most of the checks rather than depositing the funds into her business account. You can read the full 20 page issue including multiple reports of insurance fraud convictions at http://zalma.com/blog/wp-content/uploads/2023/05/ZIFL-05-15-2023.pdf Hard Fraud Those who try to put fraud in more than one category move from soft fraud to what they call “hard fraud.” Hard fraud is considered a fraud or attempted fraud that is premeditated and intentionally committed. It is considered “hard fraud” because the person perpetrating the fraud did so intentionally and the claim was made for the sole purpose of defrauding the insurer rather than a fraud of opportunity. Of course, fraud is always an intended act or failure to act that damages another. The differentiation exists because some fraud perpetrators are honest people tempted to “cheat a little” when a real claim appears while hard fraud perpetrators intend to do the crime even before a loss is reported. Both have committed the crime or cheated an insurer but soft fraud perpetrators are nicer than those who perpetrate hard fraud. You can read the full 20 page issue at http://zalma.com/blog/wp-content/uploads/2023/05/ZIFL-05-15-2023.pdf Health Insurance Fraud Convictions California Man Convicted of Health Care Kickback Conspiracy Steven Donofrio, 49, was convicted by a jury on May 5, 2023, following a two-week trial before U.S. District Judge Robert W. Schroeder, III. Donofrio, a Temecula, California, man has been found guilty of federal violations related to a health care kickback scheme in the Eastern District of Texas. You can read the full 20 page issue including multiple reports of insurance fraud convictions at http://zalma.com/blog/wp-content/uploads/2023/05/ZIFL-05-15-2023.pdf Other Insurance Fraud Convictions Crop Insurance Fraud Conviction James Garrett, age 68, was sentenced to 18 months in federal prison, followed by two years of supervised release, and ordered to pay $1,045,544 in restitution to the United States. Levi Garrett, age 44, was sentenced to 24 months in federal prison, followed by two years of supervised release, and ordered to pay $279,396 in restitution to the United States. Chief Judge Roberto A. Lange, U.S. District Court, has sentenced the two Sully County, South Dakota, men convicted of False Statements in Connection with Federal Crop Insurance. The sentencing took place on January 30, 2023. You can read the full 20 page issue including multiple reports of insurance fraud convictions at http://zalma.com/blog/wp-content/uploads/2023/05/ZIFL-05-15-2023.pdf Arson for Profit Arson is probably the dumbest form of insurance fraud. With modern municipal fire departments arson fires seldom totally destroy the premises, evidence is always left for arson investigators to review, and firefighters and the public are exposed to danger of injury and death and, as a result, judges have little mercy for an arsonist. Arsonists hoping to make a profit from a fire seldom sit back and accept their punishment when they are convicted. You can read the full 20 page issue including multiple reports of insurance fraud convictions at http://zalma.com/blog/wp-content/uploads/2023/05/ZIFL-05-15-2023.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 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. You can read the full 20 page issue at http://zalma.com/blog/wp-content/uploads/2023/05/ZIFL-05-15-2023.pdf

Panel Rehearing Denied by Ninth Circuit Readers of Zalma on Insurance read a digest of the earlier version of this case at http://zalma.com/blog/?s=BERNAL. That decision was amended by the Ninth Circuit to state that "The district court shall enter judgment for MBIC." Appellee's petition for panel rehearing was otherwise denied. No further petitions for rehearing will be accepted. In Massachusetts Bay Insurance Company v. Neuropathy Solutions, Inc., dba Superior Health Centers, and Rigoberto Bernal, an individual; et al., No. 22-55272, United States Court of Appeals, Ninth Circuit (May 5, 2023) the Ninth Circuit refused rehearing and reiterated its decision allowing the insurer to recover from its insured money paid under a reservation of rights. Decision In this diversity action under California law, Massachusetts Bay Insurance Company (MBIC) sought reimbursement of $2 million that it paid under a reservation of rights to settle litigation brought against its insured, Neuropathy Solutions, Inc. (Neuropathy). To the extent that the underlying Bernal action falls within the coverage provisions of the insurance policy (i.e., to the extent Neuropathy's liability arose out of an accidental "occurrence"), coverage is excluded under the policy's "Professional Services" exclusion. Based on California case law, the insurance policy's text, and the operative complaint in the Bernal action, Neuropathy's liability in Bernal fell within the "Professional Services" exclusion. Starting from the very first sentence of the Bernal complaint, it is evident that Neuropathy incurred liability as a result of the professional services it provided. The "Professional Services" exclusion extends to wrongdoing in the supervision and monitoring of others in the provision of professional services, and Neuropathy incurred liability because of its provision of professional advertising and medical services, not inadequate record keeping or poor customer service. Finally, the complaint's allegation that Neuropathy engaged in discriminatory "marketing techniques and high-pressure sales tactics" falls within the "Professional Services" exclusion for advertising services and health advice or instruction. Neuropathy's liability in the Bernal action was thus excluded from coverage, and MBIC is entitled to reimbursement of the $2 million it paid to settle that lawsuit. The district court shall enter judgment for MBIC. ZALMA OPINION The Ninth Circuit, for the second time, reiterated that an insurer that paid a settlement under a reservation of rights and established that there was no coverage for the loss alleged because of a clear and unambiguous exclusion, was entitled to reimbursement of the funds it spent to settle the law suit. The Insured, Neuropathy owes $2 million plus interest to MBIC. (c) 2023 Barry Zalma & ClaimSchool, Inc. Subscribe and receive videos limited to subscribers of Excellence in Claims Handling at locals.com https://zalmaoninsurance.locals.com/subscribe. Consider subscribing to my publications at substack at https://barryzalma.substack.com/publish/post/107007808 Go to Newsbreak.com https://www.newsbreak.com/@c/1653419?s=01 Barry Zalma, Esq., CFE, is available at http://www.zalma.com and zalma@zalma.com Follow me on LinkedIn: www.linkedin.com/comm/mynetwork/discovery-see-all?usecase=PEOPLE_FOLLOWS&followMember=barry-zalma-esq-cfe-a6b5257 Write to Mr. Zalma at zalma@zalma.com; http://www.zalma.com; http://zalma.com/blog; daily articles are published at https://zalma.substack.com. Go to the podcast Zalma On Insurance at https://podcasters.spotify.com/pod/show/barry-zalma/support; Follow Mr. Zalma on Twitter at https://twitter.com/bzalma; Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921; Go to Barry Zalma on YouTube- https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg; https://creators.newsbreak.com/home/content/post; Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library.

Arson Investigators May Testify as Experts as to Cause and Origin of Fire Following NFPA Guidelines Establishes Expertise Defendant, Todd N. Perkins, appealed twenty-eight criminal convictions stemming from a jury's verdict finding that he intentionally caused a building explosion. He challenged the trial court's denial of a hearing to determine the reliability of the bases for the arson investigators' opinions. In The People of the State of Colorado v. Todd N. Perkins, No. 20CA0882, 2023 COA 38, Court of Appeals of Colorado, Division A (May 4, 2023) the Court of Appeals dealt with claims of incompetent fire cause experts. BACKGROUND The prosecution's evidence at trial established the following pertinent facts: In August 2018, a residential apartment building in Denver exploded and caught fire. Law enforcement personnel, including two fire investigators from the Denver Fire Department, responded to the scene and found Perkins, badly injured and burned, in the rubble of an apartment unit belonging to tenant Matthew Brady. A few months after the explosion, the police interviewed Perkins at the hospital. He admitted that he was in the basement of Brady's apartment on the date of the explosion. During their investigation, the police learned the following information: In the months before the explosion, Perkins worked as a handyman for the building owner and had performed repairs in Brady's apartment. The building owner had recently fired Perkins. Brady had not given Perkins permission to be inside his apartment on the day of the explosion. After he was fired, Perkins had sent a series of strange and arguably threatening text messages to the building owner. There was a natural gas smell in the building before the explosion. There were no gas leaks outside the building on the date of the explosion. Right before the explosion, Perkins was seen either on the roof of the building or in Brady's backyard. A certified K-9, trained to detect accelerants, identified multiple potential areas of accelerant in the basement. On the first floor of the apartment, the police found the gas stove turned on, and the thermostat set to "heat." Subsequent testing confirmed that Perkins's DNA was present on both the thermostat and the crescent wrench. Based on their examination of the scene, the fire investigators concluded that the disconnected natural gas lines in the basement of Brady's apartment created a combustible mix of natural gas and air that ignited and caused the explosion. A jury convicted Perkins as noted and the court sentenced him to 195 years in the custody of the Department of Corrections. HEARING The prosecution endorsed Denver Fire Department investigators Don Patterson and Jonathan Riggenbach to testify as fact witnesses and as experts in fire investigation and origin and cause investigation. The fire investigators opined that the explosion originated in the basement of Brady's apartment and that Perkins intentionally caused the explosion by disconnecting natural gas pipes and igniting the gas. The court denied Perkins's motion to refuse to allow expert testimony from the investigators. The standards set forth by the National Fire Protection Association (NFPA) in its NFPA 921, Guide for Fire and Explosion Investigations, are widely regarded as the gold standard for fire investigation techniques. The court found that the prosecution's experts were either NFPA certified or otherwise complied with the NFPA standards for fire investigators. APPLICABLE LAW Perkins challenged the reliability of arson science. A failure to strictly follow the NFPA guidelines does not automatically make the methodology unreliable. It was not designed to encompass all the necessary components of a complete investigation or analysis of any one case nor intended as a comprehensive scientific or engineering text. Because every fire incident is unique, NFPA 921 recognizes that not all techniques will apply to a particular incident and that it is up to the investigator's discretion "to apply the appropriate recommended procedures in this guide to a particular incident." The Court of Appeal concluded that the fire investigators methodology was reliable because they used NFPA 921 to guide their investigation even though they did not strictly adhere to every step in NFPA 921. Since the fire investigators' testimony reveals that their proffered conclusions were based on deductive reasoning, drawing from their personal observations at the scene of the explosion (i.e., the significant amount of physical evidence of the explosion), as well as their review of related investigative reports and other documentary materials - including NFPA 921. Therefore, the trial court did not abuse its discretion by determining that it had sufficient information to make reliability findings. CONCLUSION The standards set by the NFPA and specifically NFPA 921, the Guide for Fire and Explosion Investigations, constitute a reliable basis for an expert's opinion. Strict compliance with NFPA 921 is not required for an expert's testimony to be admissible under CRE 702, and that deviations from NFPA 921 go to the weight of the expert's opinion and not the opinion's admissibility. ZALMA OPINION Arson investigation is, in part, a scientific exercise based upon collection of facts. The NFPA sets standards for fire cause investigation. The standards are not restrictions upon the work of the investigators. They are guidelines not carved in stone. The fire cause investigators followed NFPA 921 sufficiently to allow their testimony as an expert and the conviction was affirmed. The evidence presented at trial was overwhelming and could have been sufficient to convict Perkins and the expertise of the arson investigators were properly presented to help the jury reach a decision. Mr. Perkins should spend the rest of his natural life in Prison. (c) 2023 Barry Zalma & ClaimSchool, Inc. Subscribe and receive videos limited to subscribers of Excellence in Claims Handling at locals.com https://zalmaoninsurance.locals.com/subscribe. Consider subscribing to my publications at substack at https://barryzalma.substack.com/publish/post/107007808 Go to Newsbreak.com https://www.newsbreak.com/@c/1653419?s=01 Barry Zalma, Esq., CFE, is available at http://www.zalma.com and zalma@zalma.com Follow me on LinkedIn: www.linkedin.com/comm/mynetwork/discovery-see-all?usecase=PEOPLE_FOLLOWS&followMember=barry-zalma-esq-cfe-a6b5257 Write to Mr. Zalma at zalma@zalma.com; http://www.zalma.com; http://zalma.com/blog; daily articles are published at https://zalma.substack.com. Go to the podcast Zalma On Insurance at https://podcasters.spotify.com/pod/show/barry-zalma/support; Follow Mr. Zalma on Twitter at https://twitter.com/bzalma; Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921; Go to Barry Zalma on YouTube- https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg; https://creators.newsbreak.com/home/content/post; Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library.

It is Prudent to Read the Policy Before You Sue The insured sued its insurer for what it believe was the limit of liability of its policy for damage to property by fire. The insurer defended based on the fact that as an excess policy in one of multiple lawyers of insurance coverage it was only obligated to pay that proportion of the loss as described in the policy. The Insured sued and the USDC for the Eastern District of Washington resolved the dispute by reading the full policy in Oregon Potato Company v. Kinsale Insurance Company, No. 2:22-CV-0049-TOR, United States District Court, E.D. Washington (May 5, 2023). BACKGROUND In a first-party property insurance excess coverage dispute the USDC was faced with competing motions for summary judgment. Plaintiff Oregon Potato Company (“OPC”) sued Kinsale Insurance Company for (1) declaratory judgment, (2) breach of contract, (3) insurance bad faith and breach of the covenant of good faith and fair dealing, (4) violation of Washington's Unfair Claims Settlement Practices Act and Consumer Protection Act, and (5) reservation to assert claims for violation of Washington's Insurance Fair Conduct Act. OPC is a Washington corporation headquartered in Pasco, Washington that processes vegetable products and has a facility in Warden, Washington. On January 21, 2021, a fire destroyed or damaged OPC property in Warden. Before the fire OPC had purchased first-party property insurance covering its properties written in three layers, with the last insurer, Kinsale taking (20%) over the second excess layer for $25,000,000 to $50,000,000 for the shares shown in their respective parentheses. Kinsale expresses liability as “$5,000,000 Part of $25,000,000 Excess of $25,000,000 Per Occurrence.” Kinsale's policy contains the following Insuring Agreement: The company will indemnify the Insured for our share, as shown in Item 1 of the Declarations Page of this Policy, of the Ultimate Net Loss caused by the direct physical loss or damage to Covered Property in excess of the Primary and Underlying Excess Insurance as shown in the Schedule of Underlying Insurance of this Policy, occurring during the policy period. This agreement is subject to the following terms, conditions and any endorsements to this Policy. Kinsale's policy defines “Ultimate Net Loss” as follows: Ultimate Net Loss shall mean the actual loss sustained by the Insured as a direct physical result of the peril(s) insured against by the policy(ies) of the Primary and/or Underlying Excess Insurer(s) limited by: a. Any sub limited contained within this Policy or the policy(ies) of the Primary and/or Underlying Excess Insurer(s), and b. Making deductions for any salvage and recoveries from any source other than this Policy and the policy(ies) of the Primary and/or Underlying Excess Insurer(s). The first sub-location listed on the Statement of Values, shown in paragraph 10, was severely damaged. Kinsale initially viewed OPC's loss as “a complete loss to our layer/capacity” and set reserves at is full $5 million limit. Kinsale does not dispute that this was its preliminary determination but contends that it was subsequently superseded by a more accurate determination of a lower loss reserve after investigation and evaluation proceeded. OPC sent an Insurance Fair Conduct Act notice to Kinsale asking to pay its full $5 million limit. Kinsale responded that its policy “unambiguously” provides only “limited liability for Location 1 to the $25,100,000 stated value” and that its limit of liability is not $5 million, but instead 20% of every dollar of loss above $25 million. OPC contends it is currently entitled to payment of the remaining balance of Kinsale's $5,000,000 policy limit and Kinsale contending that it has paid all sums due according to proofs of loss submitted to date. DISCUSSION The “Occurrence Limit of Liability Endorsement” (“OLLE”): OLLE is a modification to the underlying policy and sets the upper limits of Kinsale's liability. The OLLE is read in conjunction with the rest of the policy as “ALL OTHER TERMS AND CONDITIONS OF THE POLICY REMAIN UNCHANGED.” The underlying policy states that Kinsale will indemnify OPC “for our share ... of the Ultimate Net Loss . . . in excess of the Primary and Underlying Excess Insurance as shown in the Schedule of Underlying Insurance of this Policy”. Taken together, the language of Kinsale's policy is not ambiguous. Kinsale's insurance policy provides excess coverage, which when triggered, is for their “share”, i.e., $5 million out of the $25 million, or 20 percent. Kinsale's proportional/share liability does not automatically entitle OPC to $5 million under the OLLE - to read otherwise would entitle OPC to overlapping, not excess, coverage. It was only required to pay 20% of the amount owed by its share of the total loss. Therefore, summary judgment in Kinsale's favor is appropriate. (c) 2023 Barry Zalma & ClaimSchool, Inc. Subscribe and receive videos limited to subscribers of Excellence in Claims Handling at locals.com https://zalmaoninsurance.locals.com/subscribe. Consider subscribing to my publications at substack at https://barryzalma.substack.com/publish/post/107007808 Go to Newsbreak.com https://www.newsbreak.com/@c/1653419?s=01 Barry Zalma, Esq., CFE, is available at http://www.zalma.com and zalma@zalma.com Follow me on LinkedIn: www.linkedin.com/comm/mynetwork/discovery-see-all?usecase=PEOPLE_FOLLOWS&followMember=barry-zalma-esq-cfe-a6b5257 Write to Mr. Zalma at zalma@zalma.com; http://www.zalma.com; http://zalma.com/blog; daily articles are published at https://zalma.substack.com. Go to the podcast Zalma On Insurance at https://podcasters.spotify.com/pod/show/barry-zalma/support; Follow Mr. Zalma on Twitter at https://twitter.com/bzalma; Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921; Go to Barry Zalma on YouTube- https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg; https://creators.newsbreak.com/home/content/post; Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library.

Failure to Investigate Potential for Coverage When an insurer contended that an animal liability exclusion in the insured's homeowner's insurance policy (the policy) precluded any duty to defend because the third party plaintiffs sued the insured for injuries they and their dogs sustained when their dogs were bitten by two pit bulls on a public street, the trial court granted summary judgment to the insurer and the insured appealed. In Poonam Dua v. Stillwater Insurance Company, B314780, California Court of Appeals, Second District, Second Division (May 5, 2023) the California Court of Appeals explained why the duty to defend is greater than the duty to indemnify and why the insurer should conduct a thorough investigation before denying a claim for defense. FACTS The insurer reviewed the underlying complaint and determined that the exclusion applied because the underlying complaint alleged that the pit bulls lived at the insured's home, which was covered by an animal liability exclusion and therefore it had no obligation to indemnify an excluded claim. The insured denied any ownership or control of the pit bulls, which were owned by her boyfriend, who did not live at her home. The insurer, ignoring basic insurance policy interpretation rules, equated its obligation to indemnify with its duty to defend. The insurer denied the insured a defense because, if the exclusion applies, the insurer has no obligation to defend. Even if the insured was correct and the pit bulls were not under her ownership, did not live in her home, and were not under her control when the attack occurred the Court of Appeals noted that the third party still might have raised a claim potentially covered by the policy. An insurer can be excused from the duty to defend only if the third party complaint can by no conceivable theory raise an issue within the policy's coverage. The insured was alleged to know the dogs were dangerous and the insurer knew that the dogs were being walked by the insured's boyfriend near her home. Even if, as currently pleaded, the third party lawsuit was frivolous and baseless, does not mean there was no possibility of coverage and thus no duty to defend. Ignoring the California Fair Claims Settlement Practices Regulations, the insurer did nothing to investigate and concluded there was no possible coverage based only on the animal liability exclusion. Poonam Dua (Dua) argued that the trial court erred in granting summary judgment in favor of Stillwater on her claims based on Stillwater's refusal to defend Dua in the third party lawsuit. FACTUAL BACKGROUND Dua was the named insured on a homeowner's insurance policy issued by Stillwater that provided her with personal liability coverage. The policy made three references to an "animal liability exclusion." Third Party Lawsuit Against Dua Simeon and Roslyn Peroff sued Dua and Eric Taylor (Taylor) for personal injuries and property damage caused by Taylor's dogs. In their complaint, the Peroffs alleged that while they were walking their two dogs on a street in Calabasas, California, Taylor was also walking his dogs, and Taylor's dogs attacked the Peroffs' dogs. Taylor was alleged as the owner and the only person walking the dogs when the attack occurred. As to Dua, the Peroffs' complaint alleged that Taylor and his dogs lived at Dua's home, that Dua knew the "TAYLOR PIT BULLS" were dangerous and their attack was reasonably foreseeable to her but she did not prevent it, and that Dua was therefore liable because she was "the owner of the property and/or related [sic] that housed or w[as] otherwise aware of the TAYLOR PIT BULLS," and had a "duty of care" to take measures to prevent the attack and did not do so. The trial court granted Stillwater's motion for summary judgment. DISCUSSION Since the duty to defend is contractual (Buss v. Superior Court (1997) 16 Cal.4th 35, 47.) A liability insurer owes a broad duty to defend its insured against claims that create a potential for indemnity. The duty to defend applies to claims that are groundless, false, or fraudulent. However, where there is no possibility of coverage, there is no duty to defend. Where the extrinsic facts eliminate the potential for coverage, the insurer may decline to defend even when the bare allegations in the complaint suggest potential liability. This is because the duty to defend, although broad, is not unlimited. When Dua sought Stillwater's defense against the Peroffs' lawsuit, she informed Stillwater that she did not own the dogs and that the dogs were in the care, custody, and control of her boyfriend when the dog attack occurred because Taylor was walking the dogs. There was no evidence that Stillwater took any measures to investigate or otherwise negate the facts suggesting that an animal liability exclusion may not apply and there was potential coverage, and therefore it had a duty to defend Dua. Stillwater conflated the possibility of Dua's liability with Stillwater's duty to defend. The Court of Appeals concluded that Stillwater had not established that there was no conceivable theory to bring the third party complaint within the possibility of coverage, and the facts Dua provided to Stillwater suggested that there may be coverage. In sum, Stillwater failed to meet its burden of establishing it was entitled to summary judgment on Dua's breach of contract claim, and the trial court erred in granting it summary judgment. A mere breach of contract, as alleged, however, is insufficient to determine bad faith. Dua has introduced facts giving rise to a material dispute of fact as to whether Stillwater unreasonably or improperly failed to defend when it was presented with facts suggesting that the animal liability exclusions did not apply. The Court of Appeal concluded that summary judgment in favor of Stillwater was improper and on remand, the trial court was required to enter an order denying Stillwater's motion for summary judgment on Dua's second cause of action for bad faith and breach of the covenant of good faith and fair dealing. ZALMA OPINION California's Fair Claim Settlement Practices regulations require the insurer to conduct a thorough investigation of a claim against an insured before making a decision to defend or indemnify an insured. Stillwater decided to rely on an exclusion that, had it done a thorough investigation and believed the reports of its insured, would have defended its insured. The decision of the trial court was a Pyrrhic victory since, on appeal, the appellate court followed the law and compelled the insurer to defend, and possibly indemnify its insured to a spurious claim against a person who neither owned nor controlled the Pit Bulls that caused the injury. (c) 2023 Barry Zalma & ClaimSchool, Inc. Subscribe and receive videos limited to subscribers of Excellence in Claims Handling at locals.com https://zalmaoninsurance.locals.com/subscribe. Consider subscribing to my publications at substack at https://barryzalma.substack.com/publish/post/107007808 Go to Newsbreak.com https://www.newsbreak.com/@c/1653419?s=01 Barry Zalma, Esq., CFE, is available at http://www.zalma.com and zalma@zalma.com Follow me on LinkedIn: www.linkedin.com/comm/mynetwork/discovery-see-all?usecase=PEOPLE_FOLLOWS&followMember=barry-zalma-esq-cfe-a6b5257 Write to Mr. Zalma at zalma@zalma.com; http://www.zalma.com; http://zalma.com/blog; daily articles are published at https://zalma.substack.com. Go to the podcast Zalma On Insurance at https://podcasters.spotify.com/pod/show/barry-zalma/support; Follow Mr. Zalma on Twitter at https://twitter.com/bzalma; Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921; Go to Barry Zalma on YouTube- https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg; https://creators.newsbreak.com/home/content/post; Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library.

Staged Accident Eliminates Coverage In a no-fault auto insurance matter brought in New York, State Farm Fire and Casualty Company, as the plaintiff insurer established prima facie entitlement to summary judgment by: submitting the examination under oath transcript of defendant insured Lesie Merle, in which she testified that she primarily garaged the car involved in the accident in Far Rockaway, New York, rather than in Connecticut; the affidavit of its underwriter Christina Ardito, who establishes that such misrepresentation to plaintiff of the car's location was material. In State Farm Fire And Casualty Company v. Lesie Merle, Katie Dieubon, Brittani Watson, Yolaunda Vaughn, Affinity Rx Inc, All County, LLC, Amsc, LLC, Benessere Services Inc, Honest Acupuncture P.C., Integrated Interventional Pain Management P.C., Khawaja Asim Siddique, M.D., Lite Care Rehab Pt P.C., Macintosh Medical, P.C., Medical Mri P.C., Noam Kurtis Md P.C., Patient Chiropractic, P.C., And Wind Physical Therapy P.C., Index No. 153004/2021, MOTION SEQ. No. 002, 2023 NY Slip Op 31281(U), Supreme Court, New York County (April 19, 2023) the trial court found in favor of State Farm. FACTS Plaintiff established that defendant Brittani Watson failed to appear for an examination under oath ("EUO") pursuant to the terms of the policy. The failure of an injured person to appear for an ["EUO"] is a defense to any claim for benefits by that person or their assignors. State Farm established through claim specialist Richa Sinha who attested EUO testimony led it to conclude that the accident had been staged. This prima facie established plaintiff's right to deny claims arising from the accident. DECISIONS Accordingly, it was ORDERED that: the plaintiff's motion for summary judgment was granted; defendant Lesie Merle's cross-motion to vacate the default judgment entered against her was denied; plaintiff is not obligated to provide any coverage, reimbursements, or pay any monies, sums, or funds to any of the answering defendants herein for any and all no-fault related services for which claims and/or bills have been, or may in the future be, submitted by the answering defendants to plaintiff; The answering defendants lack standing to seek or recover no-fault, uninsured/underinsured and property damage benefits and/or claims submitted by or on behalf of BRITTANI WATSON as she breached a condition precedent to coverage by failing to appear for an examination under oath in connection with the claim that gave rise to the above-captioned lawsuit; that the answering defendants lack standing to seek or receive No-Fault reimbursements for any bill submitted by or on behalf of LESIE MERLE, as she perpetrated a scheme to defraud and/or fraudulently procure a policy of insurance from plaintiff by knowingly submitting an application for insurance that contained material misrepresentations of fact and false and/or fraudulent statements; that the alleged motor vehicle accident of November 26, 2019, which gave rise to the above-captioned lawsuit, was not the product of a covered event as defined by the applicable policy of insurance issued by plaintiff since the incident of November 26, 2019, was the product of a staged and/or intentional event; plaintiff, by reason of no coverage and since the alleged accident of November 26, 2019 was the product of a staged and/or intentional event, is not required to pay any sums, monies, damages, awards and/or benefits to any of the appearing Defendants, their agents, employees, assignors and/or heirs arising out of any current or future proceedings, all uninsured/underinsured motorists lawsuits and arbitrations, arbitrations and lawsuits seeking to recover no-fault benefits, third-party lawsuits and arbitrations, and all claims for property damage arising out of the alleged accident of November 26, 2019. ZALMA OPINION State Farm refused to be cowed by a suit seeking benefits for a fraudulent, staged auto accident, and a fraudulently obtained policy of insurance, and defeated the multiple claims created as part of the fraud scheme. Every insurer should emulate State Farm and thoroughly investigate each claim and, when fraud is suspected, collect the necessary evidence and refuse to pay and be willing to litigate the issue. (c) 2023 Barry Zalma & ClaimSchool, Inc. Subscribe and receive videos limited to subscribers of Excellence in Claims Handling at locals.com https://zalmaoninsurance.locals.com/subscribe. Consider subscribing to my publications at substack at https://barryzalma.substack.com/publish/post/107007808 Go to Newsbreak.com https://www.newsbreak.com/@c/1653419?s=01 Barry Zalma, Esq., CFE, is available at http://www.zalma.com and zalma@zalma.com Follow me on LinkedIn: www.linkedin.com/comm/mynetwork/discovery-see-all?usecase=PEOPLE_FOLLOWS&followMember=barry-zalma-esq-cfe-a6b5257 Write to Mr. Zalma at zalma@zalma.com; http://www.zalma.com; http://zalma.com/blog; daily articles are published at https://zalma.substack.com. Go to the podcast Zalma On Insurance at https://podcasters.spotify.com/pod/show/barry-zalma/support; Follow Mr. Zalma on Twitter at https://twitter.com/bzalma; Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921; Go to Barry Zalma on YouTube- https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg; https://creators.newsbreak.com/home/content/post; Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library.

Two Years Is Not "As Soon as Practical" Plaintiff appealed the trial court order granting summary disposition in defendant's favor (no genuine issue of material fact) and the trial court order granting in part and denying in part defendant's motion for costs and attorney fees. Defendant cross appeals the trial court order granting in part and denying in part its motion for costs and attorney fees. In Maple Manor Rehabilitation Center, LLC v. Evanston Insurance Company, No. 359147, Court of Appeals of Michigan (April 27, 2023) resolved the disputes. FACTS Dorothy Irvine, 88 years old, was admitted to plaintiff, Maple Manor Rehabilitation Center ("Maple Manor"), on November 25, 2014, after a hospital stay. On or about December 11, 2014, she was found lying on the floor at the rehabilitation center. She passed away at the Hospital on December 16, 2014. Irvine's death certificate, issued December 17, 2014, indicated that the cause of her death was atherosclerotic cardiovascular disease, and the manner of her death was natural. On July 20, 2017, Irvine's son, as personal representative of Irvine's estate, filed a wrongful death lawsuit against Maple Manor, asserting negligence ("the Irvine lawsuit"). At the time the Irvine lawsuit was filed, Maple Manor had a professional insurance policy in place with Evanston Insurance Company ("defendant"). However, Maple Manor did not notify the defendant of the Irvine lawsuit when it was filed. Rather, Maple Manor defended the Irvine lawsuit itself. On June 7, 2019, Maple Manor reported the Irvine lawsuit to it broker. On June 12, 2019, defendant denied the request, stating it was not notified of the claim in a timely manner as required by the insurance policy. Maple Manor then filed a complaint against the defendant for breach of contract. Defendant asserted the policy issued to Maple Manor contained language requiring that claims be made during the policy period, and reported to defendant "as soon as practicable," including "immediately" forwarding to Evanston any legal process in order to qualify for coverage. The trial court found that notice provided 18 months after the Irvine lawsuit had been filed was not "as soon as practicable" under the circumstances. The trial court further opined that defendant was prejudiced by the late notice because Maple Manor took away any flexibility on how defendant would have defended the case, who it would have selected as counsel, what strategies it would have employed, etc. The trial court entered an order granting summary disposition in defendant's favor. Defendant thereafter moved for attorney fees in the amount of $26,581.60 plus costs in the amount of $491.20, based primarily on its assertion that Maple Manor's lawsuit was frivolous. The trial court granted defendant's motion in part and denied it in part, awarding defendant $491.20 as prevailing party costs, as well as attorney fees incurred after the September 8, 2020 hearing on defendant's first summary disposition motion in the amount of $13,708.80 for plaintiff's failure to provide reasonable basis for its position. SUMMARY DISPOSITION For well over one hundred years, Michigan jurisprudence has without exception, assumed a working definition with a very specific legal understanding-that of being within a reasonable time under the circumstances. The Irvine lawsuit was filed against Maple Manor on July 20, 2017 but only on June 7, 2019, almost two years after the lawsuit was filed, did Maple Manor notify defendant of the wrongful death lawsuit. Nearly two years is not a reasonable amount of time in any circumstance where Maple Manor fully participated in the lawsuit with the same attorneys it has now and has offered no justifiable excuse and identified no impediment to informing defendant of the Irvine lawsuit prior. Maple Manor specifically requested cancellation of the policy with defendant on May 16, 2018. Maple Manor knew full well it had active insurance with defendant on July 20, 2017, the date the lawsuit was filed, and thereafter until it requested termination of the policy on May 16, 2018. Maple Manor made a conscious, deliberate decision not to inform defendant of the Irvine lawsuit until June 7, 2019. It was not by accident, oversight, mistake, inadvertence, or belief that it did not have coverage. Prejudice to the insurer is a material element in determining whether notice is reasonably given, and the burden is on the insurer to demonstrate prejudice. However, that principle developed in the context of "occurrence" insurance policies not a claims made policy. The delay in giving notice here was approximately two years and delays of far less have been found to be prima facie failure to give notice as soon as practicable. Maple Manor made a deliberate choice to defend against the Irvine lawsuit on its own until a point when it determined it wanted defendant to be involved. This is contrary to the express terms of the insurance contract's requirement of notice of a claim "as soon as practicable" and "immediate" service of summons or other process received by plaintiff, as well as the purpose of notice requirements in insurance contracts in general. CONCLUSION Maple Manor, a professional rehabilitation facility owned and run by doctor principals, was well aware it had professional business insurance coverage provided by defendant for the Irvine lawsuit initiated against it on July 20, 2017. Maple Manor chose not to notify defendant of the lawsuit it deemed frivolous or request defense against it from defendant until nearly two years later, when Maple Manor had already agreed to an arbitration with a minimum liability amount of $10,000. The Court of Appeals concluded that the trial court did not err in finding that there was no material questions of fact on these issues and that the defendant was thus entitled to summary disposition. The purpose of imposing sanctions for asserting frivolous claims is to deter parties and attorneys from filing documents or asserting claims and defenses that have not been sufficiently investigated and researched or that are intended to serve an improper purpose. Maple Manor had no reasonable basis to believe that the facts underlying its legal position in this matter were in fact true, nor did Maple Manor's legal position have any arguable legal merit. The trial court thus abused its discretion in declining to award defendant all of its attorney fees in this frivolous matter. The grant of summary disposition was affirmed. The trial court's order awarding only part of defendant's requested attorney fees was reversed and the case was remanded for entry of an order awarding defendant all of its requested attorney fees. ZALMA OPINION Maple Manor was its own worst enemy. It paid for insurance to cover the Irvine lawsuit but decided to retain its own lawyers to defend the suit without advising its insurer that the lawsuit existed. It then lied when trying, belatedly, to get coverage although its first report to the insurer was almost two years after the suit was served and almost a year after they cancelled the claims made policy. The report was not made during the effective dates of the policy, not as soon as reasonably practical, and the suit it filed was frivolous requiring it to pay the insurer's legal fees. (c) 2023 Barry Zalma & ClaimSchool, Inc. Subscribe and receive videos limited to subscribers of Excellence in Claims Handling at locals.com https://zalmaoninsurance.locals.com/subscribe. Consider subscribing to my publications at substack at https://barryzalma.substack.com/publish/post/107007808 Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 54 years in the insurance business. He is available athttp://www.zalma.com andzalma@zalma.com Follow me on LinkedIn: www.linkedin.com/comm/mynetwork/discovery-see-all?usecase=PEOPLE_FOLLOWS&followMember=barry-zalma-esq-cfe-a6b5257 Write to Mr. Zalma at zalma@zalma.com; http://www.zalma.com; http://zalma.com/blog; daily articles are published at https://zalma.substack.com. Go to the podcast Zalma On Insurance at https://podcasters.spotify.com/pod/show/barry-zalma/support; Follow Mr. Zalma on Twitter at https://twitter.com/bzalma; Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921; Go to Barry Zalma on YouTube- https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg; https://creators.newsbreak.com/home/content/post; Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library.

No Good Deed Goes Unpunished Why A New Market for Insurers to Protect Small Businesses is Needed The Americans with Disabilities Act (ADA) was signed into law by President George H. W. Bush on July 26, 1990 with the good intentions of helping people with disabilities. It is a federal civil rights law that prohibits discrimination against people with disabilities in everyday activities. The ADA guarantees that people with disabilities have the same opportunities as everyone else to enjoy employment opportunities, purchase goods and services, and participate in state and local government programs. The stated goal of the ADA was to eliminate discrimination against individuals with disabilities. A major source of discrimination suffered by disabled individuals is the inability to gain access to public accommodations such as restaurants, hotels, movie theaters, gas stations and the facilities of other small businesses. The intent of the statute was to ascertain that businesses that want to comply with the law should be able to do so without undue cost, delay, or uncertainty. Although the statute was full of good intentions the law of unintended consequences took hold and those good intentions, were taken advantage of by unscrupulous people and their lawyers. Lawsuits proliferated by persons who claimed to be disabled or simply took the position that they were advocates for the disabled. In truth, the ADA advocates and their lawyers litigated under the ADA with the sole purpose of making money. Most had no intention or concern about the needs of those with disabilities. They took advantage of the provisions of the statute that allow individuals to enforce the accessibility requirements to bring a private right of action against individual businesses and property owners. This important reform in advancing equal access for the disabled has been used by some bad actors for monetary gain more than disability advocacy and threatens the small business economy in some states. The people abused by these bad actors are the owners of small businesses and owners and tenants of small retail establishments like the owners of bodegas, liquor stores, chiropractors, health care providers, and lessors. Under the private right of action allowed by the ADA an aggrieved party can seek injunctive relief remedying the violation and attorney's fees and costs. Monetary damages are not available to private parties seeking to enforce the requirements of the ADA. By providing differing remedies for private and public enforcement revealed to abusers a method to profit from the underlying intent of Congress to prevent private plaintiffs from recovering monetary relief under the ADA. Although the ADA sets its intent clearly, Small business owners have found they are added to the growing evidence of abuse of the private remedies provided by the ADA where, as a small business and small property owner, he or she either must litigate with the ADA advocates or succumb to the abusive lawsuit with a settlement. If they contact a lawyer, they will be advised that they will lose the litigation if there is even small technical errors of compliance and be required to pay fines and attorney’s fees to the advocates and their lawyers. The litigants and their lawyers know this and will offer to settle for a sum close to reasonable so that they can negotiate down to a reasonable amount. The complaints, and discovery are all computer generated by the advocate’s lawyers with only the names of the plaintiff, defendants and non-compliant part of the property, changed. The litigation expense for the plaintiff and counsel is minimal and for the defendant it is excessive. Small business people don’t have the funds necessary to protect themselves from an action legally filed under the ADA and concurrently pay to bring the property into compliance. Agreeing to an offer of settlement is the only choice available to a small business owner because no liability policy provides coverage for the defense or indemnity of the suit brought under the ADA. In a case with which I am familiar a law firm specializing in filing ADA lawsuits, and nothing else, sued a small business owner allegedly on behalf of a person claiming disabilities who met with the receptionist and made an appointment to which she never appeared. Shortly after her scheduled appointment the plaintiff filed and served an ADA lawsuit claiming that the doorbell to the business was mounted about 60 inches above the ground rather than the 40 inches required for the use of a person in a wheelchair, a technical violation of the ADA. In the 30 years since the building was acquired by its owner and leased by its tenant there were no complaints of the inability to use the doorbell. Regardless, the suit was filed and served, and defense counsel was required to be retained to avoid default at the expense of the owner and the tenant from their limited private funds. The abuse of the ADA started with its enactment. The abuse of the ADA is well known to Federal District Court and state judges, who see the same plaintiffs over and over again. There is nothing the judges can do, because of the clear language of the ADA statutes, require that the judge fulfill the requirements of the statute. Attempts have been made to curb the abuse. For example, in 2006, the Hastings Womens Law Journal, 17 Hastings Women's L.J. 93 2006 published an article entitled Private Enforcement of the Americans with Disabilities Act via Serial Litigation: Abusive or Commendable? by Carri Becker, then a JD candidate. The cases Ms. Becker described were identical to the suit I became aware of and whose defendant found itself to be one of a multitude of ADA lawsuits filed across the country and that the minor abuses claimed would cost thousands of dollars to cure plus the fees of the lawyers who brought the suit and the fees of counsel retained to defend the small business owner. Since 2006 ADA lawsuit abuse continued to be prolific throughout the nation. Profitability of ADA litigation has given rise to what courts have described as "a cottage industry" that has little or nothing to do with assisting people with disabilities. Ms. Becker noted that, for example, “a single law firm in Philadelphia has filed hundreds of lawsuits on behalf of two disabled men, reaping thousands in attorney's fees.” Adding to the burden, small businesses are forced to comply not only with the federal standards outlined in the ADA, but also with any state, county, or city-specific regulations. With so many different regulations to follow, it is not surprising that many, if not most, buildings constructed before 1990 are out of compliance. Compounding the problem is the fact that the regulations differ substantially. For example, California's Title 24 regulations require that curb ramps have a one-half inch lip at the bottom, beveled at a 45-degree angle, whereas the ADA requires a flush transition at the bottom of the ramp. Total compliance with both state and federal regulations becomes impossible. It becomes obvious that the intent of almost all the parties filing suits on behalf of people with disabilities are really designed to bring about a cash settlement. For example, although the property owner cured the deficiency with the placement of a new $5 doorbell the demand to settle the lawsuit before discovery and adding lawyers fees was $15,000. In addition, a check of court records indicated that the plaintiff who sued the small business had filed multiple ADA lawsuits. One explanation for many people's distaste for the enforcement of the ADA via serial litigation is that the plaintiffs and their attorneys stand to financially gain from each of the suits they file and often fail to make the property ADA compliant. EXAMPLES OF ADA LAW SUITS Common examples of ADA lawsuits may include when individuals visit several business establishments within the intent to identify ADA violations, which may include the lack of handicapped parking spaces or the lack of wheelchair ramps, and then suing that business for the violation although the plaintiff was not injured. In certain instances, the individual may drive by the establishment and search for violations in the parking lot or outside of the business and never actually enter the establishment or attempt to conduct any business there. These individuals can target several businesses at once, often with the intent to win a large sum of money from the business for their claimed lack of compliance. As the Los Angeles Times reported in November 2018, about 10,000 ADA lawsuits were filed in the first six months of that year. Businesses are able to handle the cost of the upgrades to ensure access. The lawyers that file the ADA lawsuits demand huge payouts. The law lets them do so without first giving the business owner a chance to fix the lack of availability of a compliant property. For example, according to the Orange County Register one Orange County firm filed 335 ADA cases in the past year, including three dozen for a visually impaired Montana woman. The Register concluded that: “This isn’t about access — it’s simple extortion.” [https://www.ocregister.com/2018/11/20/the-latest-abuse-of-the-americans-with-disabilities-act/] What the Register did not report was that the “extortion” is perfectly legal as a result of the ADA statute. In some cases, the lawsuits are collected from the comfort of the attorney’s car or even couch, driving by handicapped parking spots to assess violations or using Google Earth to find motels without accessible pool lifts for the disabled. Lawsuits aiming to bring about compliance with an important equal rights law like the ADA are important in advancing the cause. Some of the serial litigators are doing more to rake in damages than increase accessibility. As many states have statutes that go beyond the federal bill and offer individual lawsuit filers cash payments as well as attorney expenses, the incentives to file a lawsuit shift from accessibility to cash recovery. THE COSTS IMPOSED In California, in addition to having both sides’ legal fees covered by the defendant, a plaintiff may recover a fine of a minimum of $4,000 per ADA violation and the plaintiff is not required to offer a grace period for the violation to be rectified. ADA regulations are poorly dealt with by the nearly 30 million small businesses in the US. Small businesses often lack the expertise, capital and legal support to understand and adhere to the regulations. If a business owner’s first notice of non-compliance with the law is a lawsuit the system is askew, and the small businessperson is not equipped nor able to fund defense of the suit. Sadly, a few attorneys – the ADA “trolls” — realized that ADA can be a profit center by simply filing cases that, on the surface, have merit. But instead of pursuing those cases to a conclusion, the “trolls” offer to go away in exchange for a financial payoff. The “trolls” are especially active in California and New York, where state laws permit private individuals to recover money damages. For years, most of the ADA “troll” cases involved people in wheelchairs suing over physical or architectural accessibility. Suits would be filed, and the attorneys would then demand a certain amount of money to simply go away. These are not “frivolous” suits in the sense that they have no merit. What sets these lawsuits apart is that they are filed with such enormous volume that the attorneys involved could not possibly represent the plaintiffs properly in any one of them. The critical element of the “troll” lawyers’ business plan is volume. The attorneys have to file a lot of cases. And they do. One “pioneer” in this area was a wheelchair-bound California plaintiff whose attorney filed some 400 lawsuits claiming that he confronted virtually identical barriers to access at different businesses, mostly restaurants. These became referred to as “drive-by” cases because there was little or no proof that the named plaintiff had ever actually visited the businesses in question. Although only one of those cases ever actually went to trial, his attorney made an estimated $10 million, and it was not clear how many of the businesses actually fixed the supposed problem. A website, adaabuse.com, reports Mega-ADA-suit-filers one of whom was so egregious he was disbarred. Although there have been attempts to modify the ADA to avoid these abuses the statute remains unchanged. LIABILITY INSURANCE UNAVAILABLE Since no insurance policy provides coverage for an ADA suit because there is no claim of bodily injury, property damage or personal injury. Liability insurance, like that provided by a Commercial General Liability (CGL) policy or a Business Owners Policy (BOP) will never provide a defense or indemnity to an insured for lack of covered claimed injuries. Since an ADA suit neither makes a claim for property damage or bodily injury but only seeks an injunction requiring compliance and attorney’s fees there is no coverage under a Commercial General Liability policy or a Business Owners Policy leaving the small business owner to defend and negotiate a settlement with the troll. A PROPOSAL FOR THE INSURANCE INDUSTRY It seems to me that ADA will not be changed to protect against ADA abuse. Every small business in a facility built before 1990 or without concern for ADA requirements, like most, is a potential defendant in an ADA suit and will be held to uninsured ransom. No current liability insurance policy, CGL, BOP, or common liability insurance policy provides coverage for the ADA suit. As a result, a small business owner, lessor or lessee that protects with insurance will find their assets naked to the ADA trolls. The small business owner will need to retain counsel, defend the suit, pay the legal extortion or face a major judgment. The ADA has created a large market for the liability insurance industry who, by use of a simple endorsement to a CGL or BOP, can create coverage to protect the small business owner and work to defeat the ADA trolls ability to profit from the scheme. PROPOSED ENDORSEMENT The Endorsement wording, I propose follows: THIS ENDORSEMENT CHANGES THE POLICY. PLEASE READ IT CAREFULLY It is hereby understood and agreed that the policy is revised to read as follows from the date of inception to the date of expiration stated in the Declarations: Americans With Disabilities Act Endorsement Special Limits of Liability Applying to this endorsement: $25,000 for the cost to make your property comply with the requirements of the ADA to conform to the accessibility required by the ADA and alleged to be in violation of the ADA by a civil suit naming you as a defendant. Insuring Agreement: We agree to pay whatever is required by counsel of our choice to defend and indemnify you if you are sued for violation of the Americans With Disabilities Act (ADA) that are claimed to have prevented a person with a disability or disabilities that the plaintiff or plaintiffs claim prevented the plaintiff(s), and/or others similarly situated, to access and use your premises because they were not in compliance with ADA standards as it relates to users with disabilities like the person suing as plaintiff. We also agree to indemnify you of the cost to bring your property in compliance with the ADA and correct the errors or deficiencies alleged in the suit brought against you, up to the limits of liability. All other terms and conditions remain the same. Every owner of a small commercial building, apartment house, rental property, or operating a small business that invites the public should or will rush to buy insurance to protect against the risk. The prudent insurer, with a staff of lawyers, adjusters, and contractors will rush to issue an endorsement that, for a reasonable additional premium, will find thousands of small business, small property owners, and everyone who is open to the public, eager to pay extra to add the coverage to their liability insurance policies. (c) 2023 Barry Zalma & ClaimSchool, Inc. Subscribe and receive videos limited to subscribers of Excellence in Claims Handling at locals.com https://zalmaoninsurance.locals.com/subscribe. Consider subscribing to my publications at substack at https://barryzalma.substack.com/publish/post/107007808 Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 54 years in the insurance business. He is available athttp://www.zalma.com andzalma@zalma.com Follow me on LinkedIn: www.linkedin.com/comm/mynetwork/discovery-see-all?usecase=PEOPLE_FOLLOWS&followMember=barry-zalma-esq-cfe-a6b5257 Write to Mr. Zalma at zalma@zalma.com; http://www.zalma.com; http://zalma.com/blog; daily articles are published at https://zalma.substack.com. Go to the podcast Zalma On Insurance at https://podcasters.spotify.com/pod/show/barry-zalma/support; Follow Mr. Zalma on Twitter at https://twitter.com/bzalma; Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921; Go to Barry Zalma on YouTube- https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg; https://creators.newsbreak.com/home/content/post; Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library.