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Brilliant National Services, Inc. (“Brilliant”) appealed a summary judgment rendered in favor of the defendant, Lexington Insurance Company (“Lexington”), which dismissed all of Brilliant’s claims against Lexington with prejudice and declared that Lexington has no duty to defend or indemnify Coastal Chemical Company, LLC (“CCC, LLC”). In Brilliant National Services, Inc. v. The Travelers Indemnity Company And Lexington Insurance Company, No. 2021 CA 1471, Court of Appeals of Louisiana, First Circuit (September 7, 2022) the Louisiana Court of Appeals resolved the coverage dispute. FACTS Brilliant sued Lexington (among other defendants), seeking contribution for the costs of defending CCC, LLC in a number of asbestos exposure personal injury lawsuits filed in various state courts in Louisiana, beginning in 2011. Brilliant alleged that Lexington issued a general liability insurance policy to its insureds for the period of August 20, 1986, through August 20, 1987 (“Lexington policy”). Brilliant alleged that certain plaintiffs in the asbestos lawsuits claimed that CCC, LLC was the successor to an insured entity under the Lexington policy that was alleged to have manufactured, distributed, marketed, or sold asbestos-containing products. Brilliant claimed that if CCC, LLC was found to be the successor to an insured entity under that Lexington policy, then the insured entity’s rights under the policy transferred to CCC, LLC by operation of law. Brilliant further alleged that regardless of whether CCC, LLC was the successor of an entity insured under the policy, Lexington owed CCC, LLC a duty to defend based on the allegations raised in the asbestos lawsuits and the terms and conditions of the Lexington policy. Brilliant sought declaratory judgment that Lexington owed a duty to defend CCC, LLC in the asbestos lawsuits. Brilliant also sought judgment in its favor and against Lexington for 1/7 of all attorney’s fees and costs paid by Brilliant in defense of CCC, LLC in the asbestos lawsuits, together with legal interest, costs, and all other relief to which Brilliant may be entitled. Lexington answered, raising numerous affirmative defenses and moved for summary judgment, seeking a judgment in its favor declaring that CCC, LLC has no rights under the Lexington policy; dismissing the claims asserted by Brilliant; and awarding judgment in favor of Lexington on itsdemand against Brilliant and CCC, LLC. Brilliant and CCC, LLC opposed the motion. The trial court granted Lexington’s motion for summary judgment; dismissed all of Brilliant’s claims against Lexington with prejudice; and declared that Lexington has no duty to defend or indemnify CCC, LLC. SUMMARY JUDGMENT ON INSURANCE COVERAGE Summary judgment declaring a lack of coverage under an insurance policy may not be rendered unless there is no reasonable interpretation under which coverage could be afforded when applied to the undisputed material facts shown by the evidence supporting the motion. Where the facts are undisputed and the matter presents a purely legal question, summary judgment is appropriate. DISCUSSION An insurer’s duty to defend its insured arises solely under contract. Generally, the insurer’s obligation to defend suits against its insured is broader than its liability for damage claims. An insurer’s duty to defend its insured is determined by the allegations of the plaintiffs petition, with the insurer obligated to furnish a defense unless from the petition, it is clear the policy unambiguously excludes coverage. An insurer’s duty to defend suits on behalf of an insured presents a separate and distinct inquiry from that of the insurer’s duty to indemnify a covered claim after judgment against the insured in the underlying liability case. Lexington’s Insureds In moving for summary judgment, Lexington argued that it had no duty to defend or indemnify CCC, LLC, nor its subrogee, Brilliant, because CCC, LLC is not and has never been one of Lexington’s “insureds.” The Lexington policy defined “named insured” as: “‘named insured’ means the person or organization named in Item 1 of the declarations of this policy[.]” The policy lists the “named insured” as Coastal, Inc. and Coastal Chemical Co. Coastal, Inc. and Coastal Chemical Co. were the “Persons Insured” under the Lexington Policy. The parties do not dispute that the Lexington policy expired prior to the formation of CCC, LLC’s predecessor, the second Coastal Chemical Co., Inc., which was incorporated on December 8, 1987. Because neither CCC, LLC nor its predecessor was a party to the Lexington policy, CCC, LLC cannot be a “named insured” under the Lexington policy. Furthermore, neither CCC, LLC nor its predecessor falls into the definition of “Persons Insured” under the Lexington Policy. Successor Liability Lexington argued that CCC, LLC could only be entitled to defense and indemnity under the Lexington policy if CCC, LLC or its predecessor acquired the named insureds’-Coastal, Inc. or Coastal Chemical Co.-rights and interests in the Lexington policy. Lexington explained that its policy has never been transferred to CCC, LLC or its predecessor. In 1987, Coastal Chemical Co., Inc. acquired the chemical distribution business of Lexington’s insured, Coastal, Inc. Brilliant and CCC, LLC identified the 1987 asset transfer agreement as the only documents through which the Lexington policy could have been conveyed, sold, or otherwise transferred from Lexington’s insured to Coastal Chemical Co., Inc. The 1987 asset transfer agreement documents shows a list of transferred assets and the Lexington policy is not listed nor referenced in the asset transfer agreement. Lexington avers that because its policy was not transferred from its insureds to Coastal Chemical Co., Inc. in the 1987 asset transfer agreement, CCC, LLC never acquired the policy nor any rights thereunder from its predecessor. Accordingly, Lexington argued it has no obligation to defend or indemnify CCC, LLC or its subrogee, Brilliant. The key consideration is whether the successor is in fact a “continuation” of the predecessor. The threshold requirement to trigger a determination of whether successor liability is applicable under the “continuation” exception is that one corporation must have purchased all or substantially all the assets of another. In the instant case, CCC, LLC admits that Coastal Chemical Co., Inc. did not purchase all the assets of Coastal, Inc., only all the assets “necessary to operate a chemical distribution business.” There is no dispute that Coastal, Inc. retained assets and remained in business after the 1987 asset transfer. Since the 1987 asset transfer agreement excluded the Lexington policy from the list of assets acquired by CCC, LLC’s predecessor from Lexington’s insured. To conclude that CCC, LLC acquired the Lexington policy, the appellate court would have to ignore the parties’ contract. The Eight-Corners Rule Lexington contended that the appellants could not point to any factual allegations made by the plaintiffs in the underlying asbestos lawsuits which, if assumed true, transforms CCC, LLC into a “Persons Insured” under the Lexington policy. Cases applying the “eight-comers rule” hold that an insurer owes a duty to defend if, assuming the factual allegations are true, there would be both (1) coverage under the policy, and (2) liability to the plaintiff. The allegations of the petition are liberally interpreted in determining whether they set forth grounds that bring the claims within the scope of the insurer’s duty to defend. An insurer’s duty to defend arises whenever the pleadings against the insured disclose even a possibility of liability under the policy. Although the allegations of the petition may ultimately turn out to be incorrect or untrue, the insurer would still be obligated to provide a defense. Even though the asbestos plaintiffs allege that CCC, LLC “negligently and defectively designed, manufactured, marketed, distributed, supplied, sold and used” the “asbestos products,” those allegations do not trigger coverage under the four comers of the Lexington policy. The pertinent Lexington policy provision clearly defines “Persons Insured” and includes only specific individuals. None of the asbestos plaintiffs’ allegations could, even if proven, transform CCC, LLC into an individual defined as a “Persons Insured” under the Lexington Policy-i.e., an executive officer, director, or stockholder of the “named insured” Coastal, Inc. or Coastal Chemical Co. The Court of Appeal affirmed the trial court’s judgment. ZALMA OPINION Asbestos claims have destroyed or bankrupted multiple insurers. As a result those insurers still viable are, like Lexington in this case, the targets of defendants seeking defense and indemnity for claims of injury by exposure to asbestos. In this case the Louisiana Court of Appeal could find no coverage because there was no way that they could stretch the language of the policy to make the plaintiffs fit within the definition of “insured” in the Lexington policy. No stranger to a liability insurance policy can be allowed defense or indemnity. (c) 2022 Barry Zalma & ClaimSchool, Inc. This image has an empty alt attribute; its file name is Books-by-Barry-Zalma-Esq.-CFE-1024x576.jpg Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 54 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com. Subscribe and receive videos limited to subscribers of Excellence in Claims Handling at locals.com https://zalmaoninsurance.locals.com/subscribe. Subscribe to Excellence in Claims Handling at https://barryzalma.substack.com/welcome. This image has an empty alt attribute; its file name is TORTOFBAD-FAITH.png Now available Barry Zalma’s newest book, The Tort of Bad Faith, available here. The new book is available as a Kindle book, a paperback or as a hard cover. Write to Mr. Zalma at zalma@zalma.com; http://www.zalma.com; http://zalma.com/blog; daily articles are published at https://zalma.substack.com. Go to the podcast Zalma On Insurance at https://anchor.fm/barry-zalma; Follow Mr. Zalma on Twitter at https://twitter.com/bzalma; Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921; Go to Barry Zalma on YouTube- https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg; Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library/

No Bad Faith Posted on September 16, 2022 by Barry Zalma See the full video at and at http://Video link https://youtu.be/365Lm11FNw In Paul Harrigan v. Fidelity National Title Insurance Company, No. AC 44424, Court of Appeals of Connecticut (September 6, 2022) the dispute was resolved after a lengthy and detailed examination of the facts and law digested below. FACTS Paul Harrigan, appealed from the judgment of the trial court, following a bench trial, rendered in part in favor of the defendant, Fidelity National Title Insurance Company, in connection with a title insurance policy (title policy) issued by the defendant to the plaintiff. Harrigan challenges the judgment in favor of the defendant only with respect to count two of the operative complaint, the third revised complaint, which alleges that the defendant’s conduct in handling an insurance claim filed by the plaintiff pursuant to the title policy violated the Connecticut Unfair Insurance Practices Act (CUIPA); General Statutes § 38a-815 et seq.; and that such unfair and deceptive acts or practices of the defendant thereby violated the Connecticut Unfair Trade Practices Act (CUTPA), General Statutes § 42-110a et seq. Harrigan claims on appeal that: the court applied an incorrect standard in its analysis of whether the defendant violated CUIPA by requiring a finding of common-law bad faith by the defendant for the plaintiff to establish a violation of CUIPA, when the proper standard is applied, the record sufficiently demonstrates that the defendant violated the relevant provisions of CUIPA, and the evidence submitted by Harrigan establishes that the defendant’s unfair practices were part of a general business practice, as required under General Statutes § 38a-816 (6). The court found that sometime in the late fall of 2011, Harrigan conclusively learned that he did not, in fact, hold title to the disputed area. By letter to the defendant Harrigan made a claim upon his title insurance policy regarding the disputed area. By letter to Harrigan the defendant acknowledged receipt of his claim and the defendant essentially accepted his claim. The issue between the parties always involved the claim’s value. In a third revised complaint, the plaintiff alleged four counts against the defendant. The second count, which alleges a violation of CUTPA, is the only count at issue in this appeal. In count two, the Harrigan alleged that the defendant was involved in the trade or commerce of providing title insurance coverage to individuals and entities who hold title to real property and that the defendant engaged in unfair and deceptive acts or practices in its administration of the title policy and handling of the plaintiff’s claim in violation of CUIPA. The matter was tried to the court, which rendered judgment in part in favor of the defendant with respect to counts two, three and four of the third revised complaint. ANALYSIS In order to sustain a CUIPA cause of action under CUTPA, a plaintiff must allege conduct that is proscribed by CUIPA. A plaintiff cannot bring a CUTPA claim alleging an unfair insurance practice unless the practice violates CUIPA. If the factual basis of a trial court’s decision is challenged, the clearly erroneous standard of review applies. A court’s determination is clearly erroneous only in cases in which the record contains no evidence to support it, or in cases in which there is evidence, but the reviewing court is left with the definite and firm conviction that a mistake has been made. The legal conclusions of the trial court will stand, however, only if they are legally and logically correct and are consistent with the facts of the case. There was no evidence presented that could have supported a finding that the defendant violated the statute. Indeed, the trial court specifically found that the primary issue in the case was the value of the plaintiffs claim, not its legitimacy, that at no time did the defendant indicate any unwillingness to pay the claim, and that the defendant never denied the claim and, in fact, essentially accepted the plaintiffs claim not long after receiving his demand letter. The evidence presented by Harrigan which shows that the parties disagreed about various matters such as the date of loss, the relocation of the septic system, and the value of the plaintiffs claim, simply does not demonstrate any misrepresentations by the defendant, nor did the court find any. In fact, the court specifically found that at no time during the claims settlement process did the defendant’s personnel act in bad faith or come within close proximity of doing so. Moreover, the evidence presented shows numerous communications between the plaintiff and representatives of the defendant concerning the status of the plaintiffs claim and why its resolution had been delayed for more than five years, which could support a finding of a violation of subdivisions (B) and (F) of § 38a-816 (6), both of which relate to delays in communications and settling the claim. During the trial, the plaintiff sought to admit into evidence exhibit 44, which consisted of the consumer complaints The Court of Appeal next set forth general principles governing its resolution of this issue. The Supreme Court has concluded “that claims of unfair settlement practices under CUIPA require a showing of more than a single act of insurance misconduct.” [Mead v. Burns, 199 Conn. 651, 659, 509 A.2d 11 (1986)] In the present case, the court specifically found that the defendant’s actions in this case clearly did not represent shining examples of sterling claims management practices, and that the issues that arose and the delay that resulted in this case were due, in no small part, to Harrigan’s unrealistic expectations colliding with the defendant’s maddening corporate inefficiency. Furthermore, in the present case, a great deal of the delay was attributable to the issue raised by the plaintiff concerning the septic system, which the court found not to be relevant to the diminution in value figure. The delays in the present case, therefore, were caused by both the plaintiff and the defendant and resulted, in part, from corporate inefficiencies and mismanagement of the defendant. The evidence in the present case does not support a finding that the defendant ignored communications from the plaintiff The plaintiff, having failed to establish a general business practice of the defendant, has failed to set forth a valid CUIPA claim, which is fatal to his CUTPA claim in count two. The court, therefore, properly rendered judgment in favor of the defendant with respect to the CUTPA claim in count two. ZALMA OPINION Delay in resolving a claim due to actions of the insured and the insurer – whether less than competent claims handling – is not evidence of bad faith or violation of the state statutes requiring insurers to treat the insured fairly and in good faith. The trial court and the appellate court decided there was no evidence of a general business practice to act in bad faith and the claim of Harrigan that the insurer acted in bad faith failed after a lengthy and detailed opinion. (c) 2022 Barry Zalma & ClaimSchool, Inc. Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 54 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com. Subscribe and receive videos limited to subscribers of Excellence in Claims Handling at locals.com https://zalmaoninsurance.locals.com/subscribe. Subscribe to Excellence in Claims Handling at https://barryzalma.substack.com/welcome. Now available Barry Zalma’s newest book, The Tort of Bad Faith, available here. The new book is available as a Kindle book, a paperback or as a hard cover. Write to Mr. Zalma at zalma@zalma.com; http://www.zalma.com; http://zalma.com/blog; daily articles are published at https://zalma.substack.com. Go to the podcast Zalma On Insurance at https://anchor.fm/barry-zalma; Follow Mr. Zalma on Twitter at https://twitter.com/bzalma; Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921; Go to Barry Zalma on YouTube- https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg; Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library/

Attempt to Avoid Reimbursement of Excess Insurer Fails No Good Deed Goes Unpunished In Western World Insurance Company v. Federal Insurance Company, Defendant, 2d Civ. No. B311994, California Court of Appeals, Second District, Sixth Division (September 8, 2022) two insurers disputed about the priority of coverage arising from a single incident. FACTS In May 2014, Elliot Roger murdered his two roommates and their friend at the Capri Apartments (Capri) in Isla Vista, California. The victims’ heirs brought an action for wrongful death (Chen v. Hi-Desert Mobile Home Park (Super. Ct. Santa Barbara County, 2015, No. 15CV04163) (Chen action) against the owner of the apartments, Hi-Desert Mobile Home Park, LP (Hi-Desert) and the manager, Asset Campus Housing, Inc. (ACH). The action alleged that ACH and Hi-Desert had notice of Roger’s violent propensities but assigned him to be the victims’ roommate. Insurance Coverage Associated Industries Insurance Company (AIIC) provided general liability coverage for both Hi-Desert and ACH. Federal Insurance Company (Federal) provided coverage in excess of AIIC’s coverage for both Hi-Desert and ACH. Western World Insurance Company (Western) provided excess general liability coverage for ACH, but not Hi-Desert. The insurers did the right thing by their insureds. They each contributed funds for a settlement of the underlying action, leaving the question of priority of coverage to separate litigation among the insurers. Instant Action Western filed a complaint against AIIC and Federal seeking a declaration that Western’s coverage was in excess of both AIIC and Federal’s coverages. Western’s first amended complaint added causes of action for equitable subrogation and equitable indemnity against Federal. Western sought the return of all of its contributed funds on the ground that the settlement of the underlying action was not in excess of Federal’s coverage. AIIC filed a cross-complaint seeking a declaration that Western’s coverage was co-primary for ACH. Federal cross complained against Western seeking a declaration that Federal’s coverage for ACH is in excess of Western’s coverage and granted Western’s motion for summary judgment. The trial court found that Western’s coverage of ACH is in excess of both AIIC’s and Federal’s coverage. The court’s grant of summary adjudication in favor of Western resolved all claims against Federal. Federal appeals. DISCUSSION Western’s Coverage Is Not Primary Western’s policy provides two kinds of general liability coverage. One is for 54 locations specifically designated by their names and addresses. It is undisputed that this is primary liability coverage. But Capri is not one of those properties. Western’s other coverage is by an endorsement to the policy under the heading “Real Estate Property Managed-Contingent.” It provides coverage for property managed but not owned by ACH. The contingency is that the property owner must maintain personal injury insurance with limits equal to or greater than $1 million. The endorsement provides that Western’s coverage is excess to any other insurance ACH has whether primary or excess. The language in Western’s endorsement could not be clearer. Here Western is not using its other insurance clause to transform its policy from primary to excess. Instead, it is using the clause to show that its policy is ab initio excess over all other insurance. That is the bargain Western made with its insured. The only insurer named in the Schedule of Underlying Insurance is AIIC with underlying limits of $1 million. Thus, the only contingency for Federal’s liability under its policy is the exhaustion of AIIC’s primary $1 million policy limits. Federal’s liability was not contingent on the exhaustion of limits under Western’s policy. Instead, Federal undertook to provide coverage immediately upon exhaustion of AIIC’s policy limits, whereas Western obligated itself to provide coverage only when the limits of all other available coverage, both primary and excess, were exceeded. Western’s coverage is in excess of Federal’s coverage. Federal is attempting to stitch together an argument gathered from bits and pieces of its policy. Its needlework has failed to create even a plausible ambiguity. Any such ambiguity would be interpreted against Federal in any event. Had Federal intended that its coverage not attach until the exhaustion of all other insurance, it could have easily said so. It did not. The trial court correctly concluded that Western’s coverage is in excess of Federal’s coverage. The elements of an insurer’s cause of action for equitable subrogation are: the insured suffered a loss for which the defendant is liable, either as the wrongdoer whose act or omission caused the loss or because the defendant is legally responsible to the insured for the loss caused by the wrongdoer; the claimed loss was one for which the insurer was not primary liable; the insurer has compensated the insured in whole or in part for the same loss for which the defendant is primarily liable; the insurer has paid the claim of its insured to protect its own interest and not as a volunteer; the insured has an existing, assignable cause of action against the defendant which the insured could have asserted for its own benefit had it not been compensated for its loss by the insurer; the insurer has suffered damages caused by the act or omission upon which the liability of the defendant depends; justice requires that the loss be entirely shifted from the insurer to the defendant, whose equitable position is inferior to that of the insurer; and the insurer’s damages are in a liquidated sum, generally the amount paid to the insured. Primary Liability Prior to the settlement of the Chen action, ACH had an assignable cause of action against Federal because Federal refused to acknowledge its duty to indemnify that ACH was primary to Western’s coverage. It would be absurd to allow Federal to use Western’s money to settle Federal’s debt to ACH, and hold the settlement deprived Western of the right to recover the money from Federal. Perhaps the most bizarre of Federal’s arguments is that Western did not suffer any damages caused by Federal. Federal is preventing money that rightly belongs to Western from being returned to it. Equitable Position Western’s coverage is in excess to Federal’s coverage; the settlement of the Chen action did not exhaust the limits of Federal’s coverage; therefore, Western is entitled to the return of its money. Prejudgment Interest The trial court awarded Western prejudgment interest at the rate of 10 percent pursuant to Civil Code section 3287, subdivision (a). The court has no discretion in awarding interest under Civil Code section 3287, subdivision (a). Federal is wrong for two reasons: Western is subrogated to ACH’s breach of contract against Federal, and Western and Federal entered into a written contract giving each party the right to litigate priority of coverage in the Chen action and reimbursement. ZALMA OPINION Western World Insurance Company did the right thing when a dispute arose between the various insurers about which insurer was primary, which excess, and which – of two excess insurers – must exhaust before the other must pay. It turned out Western was the last in line and needed reimbursement from the others of the money it paid subject to this later suit to determine who was on first, second and third. Federal tried to avoid doing the right thing only to have the Court of Appeal slap their cobbled together arguments down. Western World acted fairly and in good faith the insured and the other insurers only to have Federal try to not pay what it owed. 022 Barry Zalma & ClaimSchool, Inc. Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 54 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com. Subscribe and receive videos limited to subscribers of Excellence in Claims Handling at locals.com https://zalmaoninsurance.locals.com/subscribe. Subscribe to Excellence in Claims Handling at https://barryzalma.substack.com/welcome. Now available Barry Zalma’s newest book, The Tort of Bad Faith, available here. The new book is available as a Kindle book, a paperback or as a hard cover. Write to Mr. Zalma at zalma@zalma.com; http://www.zalma.com; http://zalma.com/blog; daily articles are published at https://zalma.substack.com. Go to the podcast Zalma On Insurance at https://anchor.fm/barry-zalma; Follow Mr. Zalma on Twitter at https://twitter.com/bzalma; Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921; Go to Barry Zalma on YouTube- https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg; Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library/

ZIFL Vol 26 Number 18 Read the full Adobe pdf version at http://zalma.com/blog/wp-content/uploads/2022/09/ZIFL-09-15-2022-1.pdf Conviction Affirmed for Multiple Counts and One Reversed Small Victory but Stay in Jail The appellate court modified the judgment, as a matter of discretion in the interest of justice, by vacating the conviction of insurance fraud in the third degree under count 57 of the indictment and the sentence imposed thereon and dismissing that count of the indictment; as so modified, the judgment is affirmed. The defendant waived his claim that one count of insurance fraud in the third degree with respect to a certain insurance policy issued by GMAC Insurance, of which he was convicted, was barred by the statute of limitations by not making a timely, written motion to dismiss on that ground. In The People of the State of New York v. Jean M. Davilmar, also known as Jean Myrtho Davilmar, No. 2018-05468, Ind. No. 4334/16, 2022 NY Slip Op 04975, Supreme Court of New York, Second Department (August 17, 2022) the defendant Jean M. Davilmar appealed from a judgment of the trial court convicting him of larceny in the third degree (2 counts), scheme to defraud in the first degree, insurance fraud in the third degree (17 counts), criminal possession of a forged instrument in the second degree (5 counts), and offering a false instrument for filing in the first degree (4 counts), after a nonjury trial, and imposing sentence. The defendant only partially preserved for appellate review his challenge to the legal sufficiency of the evidence supporting his convictions of grand larceny in the third degree (2 counts), insurance fraud in the third degree (16 counts), and scheme to defraud in the first degree (see CPL 470.05[2]. In any event, viewing the evidence in the light most favorable to the prosecution the appellate court found that it was legally sufficient to establish the defendant’s guilt of grand larceny in the third degree beyond a reasonable doubt (Penal Law §§ 155.05[1], [2][a], [b]; 155.35[1]. Likewise, the evidence was legally sufficient to establish the defendant’s guilt of insurance fraud in the third degree beyond a reasonable doubt (Penal Law § 176.20. Moreover, the evidence was legally sufficient to establish the defendant’s guilt of scheme to defraud in the first degree. Further, in fulfilling the court’s responsibility to conduct an independent review of the weight of the evidence it was satisfied that the verdict of guilt on each of those counts was not against the weight of the evidence. The sentence imposed was not excessive. The defendant’s remaining contentions were found to be without merit. Wisdom “Age is not a particularly interesting subject. Anyone can get old. All you have to do is live long enough.” — Groucho Marx “What do automobiles, guns, and home-schooling all have in common that makes the liberals hate them? All these things reduce individual dependence on the government and on the grandiose schemes for other people’s lives created by liberals and imposed by government.” —Thomas Sowell “Better a good enemy than a bad friend.” — Jewish saying “The transformation of charity into legal entitlement has produced donors without love and recipients without gratitude.” – Antonin Scalia “I do not think that we should be over-anxious. We can make sense of the future if we understand the lessons of the past.”- Elizabeth II “The art of living lies less in eliminating our troubles than in growing with them.” — Bernard M. Baruch “The unions might be good for the people who are in the unions, but it doesn’t do a thing for the people who are unemployed. Because the union keeps down the number of jobs, it doesn’t do a thing for them.” — Milton Friedman “Things turn out best for the people who make the best of the way things turn out.”— John Wooden “Semicolons only prove that the author has been to college.” – E. B. White “Sometimes in this life, under the stress of an exceptional emotion, people do say what they think.” – Marcel Proust “If our country, when pressed with wrongs at the point of the bayonet, had been governed by its heads instead of its hearts, where should we have been now? Hanging on a gallows as high as Haman’s. —Thomas Jefferson “Those who know do not speak. Those who speak do not know.” — Tao Te Ching “Ultimately a genuine leader is not a searcher for consensus but a molder of consensus.” — Martin Luther King Jr. “We must always take sides. Neutrality helps the oppressor, never the victim. Silence encourages the tormentor, never the tormented.” — Elie Wiesel “Keep away from people who try to belittle your ambitions. Small people always do that, but the really great make you feel that you, too, can become great.” — Mark Twain “Of those men who have overturned the liberties of republics, the greatest number have begun their career by paying an obsequious court to the people, commencing demagogues and ending tyrants.” —Alexander Hamilton The Coalition Against Insurance Fraud’s Calculation of Insurance Fraud in the U.S. The Coalition Against Insurance Fraud’s Report Came up With the Following Conclusions: Final Estimate Of The Cost Of Insurance Fraud In The United States: All numbers are in billions and figures are as of 2022: Property & Casualty $45B Workers’ Compensation $34 Premium Avoidance $35.1B Healthcare $36.3B Medicare and Medicaid Fraud $68.7B Life $74.7B Disability $7.4B Auto Theft $7.4B The report, when dealing with property and casualty insurance reveals that in 220 the industry collected $728.69 billion dollar in premium. If only 10% of that premium was paid to fraudsters – a fairly reasonable estimate used by the Insurance Information Institute (III) – they would receive $72.87 billion. The numbers should change enormously if the calculation follows the Insurance Research Council estimate that casualty fraud accounted for between 15% and 17% of total claims payments for auto insurance. A 15% calculation could result in $109.30 Billion and 17% the fraudsters would take $123.88 Billion. It’s good to see that the Coalition took into consideration inflation and the obvious growth of fraud since the institution of the tort of bad faith. In my opinion, however, they underestimated the true extent of fraud since the insurance industry has no admissible evidence about the true amount because most insurance fraud attempts succeed. As you read below about convictions for the crimes of insurance fraud, note how long the schemes went on before they were caught and recognize that those caught were amateurs who were so sloppy the seemed to beg the state and federal agencies to arrest them. The report also includes auto theft in the analysis of the updated estimate of the cost of insurance fraud in the United States. At the current time, auto thefts in the United States are reported to be on the rise. These thefts directly impact insurers through increased claims, investigations of the theft, and policy payments where appropriate. Auto thefts also harm consumers. Obviously, those directly impacted are harmed but so too are all consumers who pay for auto theft crimes through higher premiums. Absent provable involvement of the insured in the theft, however, auto theft is not insurance fraud but an insurance crime for which virtually all automobile insurance policies extend coverage. The Coalition recognizes the extensive and excellent work being done by our partner, the National Insurance Crime Bureau, law enforcement agencies and others to fight back on the crime of automobile thefts. We include the information in this report, and the cost in our estimate of insurance fraud cost in the United States to assist those efforts and shed additional light on the problem of automobile thefts in our nation. You can read the full report here. You can also read about the extent of Workers’ Compensation Fraud here.

Material Misrepresentation on Application Sufficient to Rescind Disability Coverage hfully represented his medical history on the application for insurance coverage in two ways. in answering questions 6 and 8, he represented that he had not received diagnosis or treatment from a physician for memory loss, confusion, or speech disruption in the five years preceding his application. in answering question 3(a), he represented that he had not missed one or more days of work or been admitted to a medical facility due to sickness or injury in the 180 days preceding his application. Upon reviewing McKinney's medical records, Provident Life concluded that his answers to those questions were untruthful and that its denial of his claim and rescission of his policy were proper. ERISA The parties do not dispute that a plan fiduciary may obtain equitable rescission of an ERISA-governed insurance policy that is procured through the material misstatements or omissions of the insured. Rescission Due to Material Misrepresentation Under the federal common law that has developed pursuant to ERISA an insurer can rescind a policy where the insured knowingly made a material misrepresentation in an application for an ERISA-governed insurance policy. Thus, Provident Life will be entitled to summary judgment if it demonstrates that there is no genuine dispute that (1) McKinney made a misrepresentation, (2) knowingly and (3) that was material to its decision to issue the insurance policy. DISCUSSION As noted, Provident Life rejected McKinney's claim for basic disability benefits and subsequent appeal on the ground that he untruthfully represented his medical history on the application for insurance coverage. Provident Life identified two of McKinney's responses that were allegedly untrue, warranting rescission of the policy. The Court found no genuine dispute of fact that McKinney made material misrepresentations in responding to questions 6 and 8 of his application for supplemental insurance coverage. McKinney contended that the “primary condition” for which he was treated during the 2016 hospitalization was cancer related to the mass on his chest, and that his confusion and speech disruption were merely symptoms of that cancer. McKinney also contended, however, that any misrepresentations in his responses to questions 6 and 8 were innocent because “he was not aware that he had been diagnosed with or treated for memory loss, confusion or speech issues. The Court concludes that any ignorance on McKinney's part that he had been treated for confusion and speech disruption during his 2016 hospitalization was not innocent. Indeed, when questioned in the course of his claim for benefits, he acknowledged that he was first diagnosed with these problems in February of 2016. The idea that he did not know about them when he applied for the insurance policy in 2017, therefore, strains credulity. The USDC concluded that there was no genuine dispute that McKinney's untrue answers to questions 6 and 8 were material to Provident Life's issuance of the policy. Courts have repeatedly explained that certain information requested by the insurer and provided by the applicant for insurance coverage is presumptively material. [Mt. Airy Ins. Co., 928 F.Supp. at 176 (citations omitted). Accord Paul Revere Life Ins. Co. v. Pastena, 52 Conn.App. 318, 323, cert. denied, 248 Conn. 917 (1999); Continental Cas. Co. v. Bank of S.E. Conn., No. 2:91CV326 (PCD), 1995 WL 871829, at *1 (D. Conn. June 22, 1995).] McKinney's knowing misrepresentations were material to Provident Life's issuance of the policy. Accordingly, McKinney was well informed that his answers to questions 6 and 8 would become part of the insurance policy he received and thus were material to Provident Life's issuance of the policy. The application's particular inquiry into the applicant's prior treatment for memory loss, confusion, or speech disruption renders those questions presumptively material. USDC May Not Rewrite the Policy It is not the role of the Court to rewrite the terms of the insurance agreement to conform to the newly disclosed facts. Given the strong weight of authority establishing the materiality of an applicant's prior medical history subject to specific inquiry, as well as the fact that McKinney's answers were incorporated into the policy issued, the Court concluded that his knowing misrepresentations to questions 6 and 8 were material. Thus, Provident Life was entitled to rescission of the insurance policy as a matter of law. ZALMA OPINION This is a classic case of "I didn't know the gun was loaded" defense when a person intentionally shoots another. In this case McKinney knew the true facts of his condition both during and after his cancer treatment and lied on the application he submitted for ERISA Disability insurance. He claimed the lie was innocent but the evidence reviewed by the USDC established he was neither innocent nor ignorant, he just lied. Therefore, the court affirmed Provident's rescission of the ERISA policy. (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 athttp://www.zalma.comandzalma@zalma.com. Subscribe and receive videos limited to subscribers of Excellence in Claims Handling at locals.comhttps://zalmaoninsurance.locals.com/subscribe. Subscribe to Excellence in Claims Handling athttps://barryzalma.substack.com/welcome. Now available Barry Zalma's newest book, The Tort of Bad Faith, available here. The new book is available as a Kindle book, a paperback or as a hard cover. Write to Mr. Zalma at zalma@zalma.com;http://www.zalma.com;http://zalma.com/blog; daily articles are published athttps://zalma.substack.com.Go to the podcast Zalma On Insurance athttps://anchor.fm/barry-zalma; Follow Mr. Zalma on Twitter athttps://twitter.com/bzalma;Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921;Go to Barry Zalma on YouTube-https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg;Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library/

General Contractor Has No Standing to Allege Insurance Fraud Steven Hester Hall appealed from an order granting Defendants' motion to dismiss Hall's claims for breach of fiduciary duties, insurance licensing violations, bank fraud, insurance fraud, breach of implied covenant of good faith and fair dealing, harassment, and unfair and deceptive trade practices. In Steven Hester Hall v. Brunswick Plantation Property Owners Association, Greg Mayol, Cathy Six, And Community Association Management Services, No. COA21-748, 2022-NCCOA-604, Court of Appeals of North Carolina (September 6, 2022) Hall wanted to build a house without the bond required by the Community Associations' regulations. FACTUAL BACKGROUND Hall is a general contractor and the CEO of Eco Lakes Construction, LLC. Eco Lakes owns real property at 649 Covington Drive NW, Calabash, NC ("property"), in the Brunswick Plantation and Golf Course Community ("Community"). Defendants are the Brunswick Plantation Property Owners Association ("Association"); Community Association Management, the property management company for the Association; Greg Mayol, the Community Association Manager for the Community; and Cathy Six, the Administrator for the Architectural Standards Committee for the Association. The Contract Performance and Master Deportment Agreement ("Master Deportment Agreement") is a contract between the Architectural Standards Committee and a general contractor on a construction project in the Community. The Master Deportment Agreement requires the general contractor to provide to the Association a $5,000 bond to be held as security for the performance of the construction project in accordance with the community governing documents-the Brunswick Plantation Architectural Plan and Residential Design and Construction Standards, and the Amended and Restated Master Declaration and Development Plan for Brunswick Plantation. Plaintiff submitted plans to construct a home on the property but did not provide the $5,000 Contractor Compliance Bond required by the Master Deportment Agreement. Defendants declined to act on Plaintiff's construction proposal until he provided the bond. Plaintiff sought a bond waiver; Defendants declined to issue a waiver. Plaintiff again refused to provide the bond, and Defendants directed Plaintiff to cease construction on the lot. On 23 April 2021, Plaintiff Hall sued and filed a motion for a temporary restraining order, and motion for a preliminary injunction against Defendants. The trial court denied the motion for a temporary restraining order. In an amended complaint, Hall alleged breach of fiduciary duties, insurance licensing violations, bank fraud, insurance fraud, breach of the implied covenant of good faith and fair dealing, harassment, and unfair and deceptive trade practices. Defendants moved to dismiss the amended. Hall moved to amend his complaint to add additional causes of action and an additional defendant, and an objection to Defendants' motion to dismiss. The trial court granted Defendants' motion to dismiss on 29 July 2021. DISCUSSION When dealing with a motion to dismiss the court must liberally construe the allegations and the court should not dismiss the complaint unless it appears beyond a doubt that the plaintiff could not prove any set of facts to support his claim which would entitle him to relief. The caption of Plaintiff's complaint indicates that he is bringing actions for breach of fiduciary duties, insurance licensing violations, bank fraud, insurance fraud, breach of implied covenant of good faith and fair dealing, harassment, and unfair and deceptive trade practices. The suit indicates only that Hall is challenging the propriety of the Contractor Compliance Bond as required by the Master Deportment Agreement. Hall failed to state a claim upon which relief may be granted under some legal theory. Standing In order for a court to have subject matter jurisdiction to hear a claim, the party bringing the claim must have standing. Standing means that the party has a sufficient stake in an otherwise justiciable controversy to obtain judicial resolution of that controversy. Every claim must be prosecuted in the name of the real party in interest. A real party in interest is a party who is benefited or injured by the judgment in the case. A lack of standing may be challenged by motion to dismiss for failure to state a claim upon which relief may be granted. The court noted that Hall appeared to argue that the Amended and Restated Master Declaration and Development Plan for Brunswick Plantation was unenforceable because it is ambiguous and is a restrictive covenant on the property. Plaintiff does not own the property, nor does he have a protected legal interest in the property. Accordingly he lacked standing to bring this action. In the alternative, the trial court dismissed Plaintiff's claims because Plaintiff did not have the authority to bring suit on behalf of Eco Lakes. In North Carolina a corporation must be represented by a duly admitted and licensed attorney-at-law and cannot proceed pro se. Here, there is no indication that Plaintiff is a licensed attorney. Rather, Plaintiff is a general contractor and is the president and CEO of Eco Lakes. To the extent Plaintiff purports to bring claims on behalf of Eco Lakes, he may not do so. The trial court's order dismissing Plaintiff's complaint is affirmed. ZALMA OPINION This case is an example of the misuse by a litigant of allegations of insurance fraud and the tort of bad faith which had no relationship to the problem. To avoid buying a miniscule $5,000 bond, Hall fled suit alleging the planned community where he wanted to build a house accusing the defendants of multiple torts and the crime of insurance fraud because they insisted he obtain a bond. He had no standing and was, if anything, attempting to bludgeon the defendants and cause it to retain counsel and defend this spurious claim. The Court of Appeal refused to honor his scheme and should have sanctioned him for bringing the case without standing. (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 and zalma@zalma.com. Subscribe and receive videos limited to subscribers of Excellence in Claims Handling at locals.com https://zalmaoninsurance.locals.com/subscribe. Subscribe to Excellence in Claims Handling at https://barryzalma.substack.com/welcome. Write to Mr. Zalma at zalma@zalma.com; http://www.zalma.com; http://zalma.com/blog; daily articles are published at https://zalma.substack.com. Go to the podcast Zalma On Insurance at https://anchor.fm/barry-zalma; Follow Mr. Zalma on Twitter at https://twitter.com/bzalma; Go to Barry Zalma 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/

Lack of Insurable Interest Makes Life Policy Void from Inception Policy Acquired as Part of a STOLI Fraud Never Existed as a Matter of Law In Geronta Funding, a Delaware Statutory Trust v. Brighthouse Life Insurance Company, No. 380, 2021, Supreme Court of Delaware (August 25, 2022) the Supreme Court was asked to determine whether premiums paid on insurance policies declared void ab initio for lack of an insurable interest should be returned. The trial court agreed with Brighthouse and relied on the Restatement (Second) of Contracts (the "Restatement") to determine whether Geronta was entitled to restitution. Specifically, the court held that Geronta may obtain restitution under Section 198 of the Restatement ("Section 198") if it could prove excusable ignorance or that it was not equally at fault. Applying this test, the court ruled that Geronta was only entitled to the return of the premiums it paid after alerting Brighthouse to the void nature of the policy at issue. RELEVANT FACTS AND BACKGROUND On July 11, 2007, the fictitious Mansour Seck Irrevocable Life Insurance Trust (the "Seck Trust") applied to MetLife Investors USA Insurance Company (Brighthouse's predecessor) for a $5 million universal life insurance policy insuring the life of a fictitious man identified as Mansour Seck (the "Policy"), with a birthday of January 1, 1933. Seck was identified as a French citizen residing at 170 Academy Street, Jersey City, New Jersey. After confirming that its procedures and guidelines were met, MetLife issued the Policy on or around July 24, 2007. Pape Seck's Arrest and Prosecution In 2010, Pape Seck was the subject of numerous press releases issued by the State of New Jersey and other insurance industry publications; they stated that Pape Michael Seck, a New York City insurance agent, had been arrested and prosecuted for fraudulent insurance schemes. Pape Seck pleaded guilty to two counts of insurance fraud concerning fraudulent applications for Mansour Seck. T Litigation and the Superior Court Ruling On April 4, 2018, Brighthouse filed suit, seeking a judicial declaration that the Policy was void ab initio for lack of an insurable interest and arguing that it is entitled to keep all the premiums paid on the Policy. Geronta filed an answer, agreeing that the Policy was void ab initio, and a counterclaim, alleging that it was entitled to reimbursement of all premiums paid, with the exception of the premiums paid by the original owner of the Policy. In its opinion, the trial court declared the Policy void ab initio. The court denied Geronta's request for rescission and disgorgement, holding that rescission is not available where a contract is void because there is no contract to "unmake." After trial, the Superior Court ruled that Geronta was only entitled to restitution of the premiums it paid after it informed Brighthouse that the Policy was void for lack of an insurable interest. ANALYSIS Overview of Potential Remedies for an Insurance Policy That Is Void Ab Initio for Lack of an Insurable Interest A contract of insurance upon a life in which the insured has no interest is a pure wager that gives the insured a sinister counter interest in having the life come to an end. A court may never enforce agreements void ab initio, no matter what the intentions of the parties. Thus, when an agreement is void ab initio as against public policy, the courts typically will not enforce a remedy to any extent against either party. In other words, the courts typically will leave the parties where they find them. Was Rescission Available? Rescission would result in the return of any premiums paid by applying equitable principles and putting both parties back in the position they were in before the contract was made. Stranger-originated life insurance ("STOLI") policies, like the one for Monsour Seck, when rescinded would require return of the premiums from the insurer to the investor. However, since the policy was void rescission was not available. Restitution Restitution is a body of substantive law in which liability is based not on tort or contract but on the defendant's unjust enrichment. Restitution has been awarded under two separate approaches: (1) a fault-based analysis grounded in considerations specific to insurance policies declared void ab initio for lack of an insurable interest and (2) the Restatement. Restitution Under A Fault-Based Analysis Grounded In Considerations Specific To Insurance Policies Declared Void Ab Initio For Lack Of An Insurable Interest Most courts considering this issue have adopted a fault-based analysis in determining whether to return premiums paid on an illegal or void insurance policy. Generally when an illegal contract is voided, the parties will be left where they have placed themselves with no recovery of the money paid for illegal services. But there is an exception for the case in which the party that made the payments is not to blame for the illegality. The Insurers were the clear victims of the STOLI scheme as was Geronta who bought the policy. If the downstream investor was equally at fault with, or more at fault than, the insurer, the the trial court should leave the parties where it found them, allowing the insurer to keep the premiums. If the downstream investor was innocent or the insurer was more at fault, the court should return the premiums. The Restatement (Second) of Contracts Restatement Section 198 lays out two exceptions to the general rule-when a party is (1) excusably ignorant and (2) not equally in the wrong with the party from whom he seeks restitution. The Supreme Court adopted a fault-based analysis, framed under the Restatement, that considers questions specific to insurance policies declared void ab initio as against public policy for lack of an insurable interest as the correct test to determine whether premiums should be returned. The Supreme Court noted that a fault-based analysis incentivizes insurers to speak up when the circumstances suggest that a policy is void for lack of an insurable interest because they will not be able to retain premiums if they stay silent after being put on inquiry notice, and they might also be responsible for interest payments. Thus, when analyzing a viable legal theory that seeks as a remedy the return of premiums paid on insurance policies declared void ab initio for lack of an insurable interest, Delaware courts are now required to analyze the exceptions outlined in Sections 197, 198, and 199 of the Restatement and determine whether any of those exceptions permit the return of the premiums. A court needs to determine whether: there would be a disproportionate forfeiture if the premiums are not returned; the claimant is excusably ignorant; the parties are not equally at fault; the party seeking restitution did not engage in serious misconduct and withdrew before the invalid nature of the policy becomes effective; or the party seeking restitution did not engage in serious misconduct, and restitution would put an end to the situation that is contrary to the public interest. The fault of the parties and public policy considerations will determine which party is entitled to the premiums paid on an insurance policy that is void ab initio for lack of an insurable interest. The Superior Court Failed to Consider Whether Either Party Had Inquiry Notice of the Void Nature of the Policy Here, prior to purchase Geronta, in consultation with Leadenhall, made the deliberate decision to superficially look at the Seck Policy by solely focusing on whether it was active. Geronta purposefully ignored the possibility that some of the unexamined policies in the bulk purchase might have been unenforceable.• "Geronta's due diligence as to the Seck Policy was extremely limited."[226] The Superior Court also concluded that Brighthouse was not at fault because Geronta failed to show that Brighthouse had actual knowledge of the void nature of the Policy. In other words, the Court found that Brighthouse did not have actual knowledge of the Policy's illegality. Section 198 and the in pari delicto cases from Section III.A.b.i focus on whether a party had either actual knowledge or inquiry notice of the invalidity of the policy. Since the trial Court failed to consider whether Bighthouse was on inquiry notice of the void nature of the Policy. The Supreme Court remanded the case for the Superior Court to reconsider its factual findings in light of this Court's articulated test and specifically direct the court to consider whether either party had inquiry notice of the void nature of the Policy and reversed the court's holdings regarding entitlement to premiums and remanded the case for consideration consistent with its opinion. ZALMA OPINON By waiting two years after inception of the policy for the fake insured the fraudsters defeated the ability of the insurer to rescind. However, since Mansour Seck did not exist the policy was not real, it was a gamble, that the criminal invested a great deal of money, sold the risk to another and profited from the crime only to have the victim sell again until Geronta found itself paying premium on a void policy. To do justice the Delaware Supreme Court has provided a means to determine who is free of guile and who is not when deciding who gets the premium back, if anyone. (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 athttp://www.zalma.comandzalma@zalma.com. Subscribe and receive videos limited to subscribers of Excellence in Claims Handling at locals.comhttps://zalmaoninsurance.locals.com/subscribe. Subscribe to Excellence in Claims Handling athttps://barryzalma.substack.com/welcome. Now available Barry Zalma's newest book, The Tort of Bad Faith, available here. The new book is available as a Kindle book, a paperback or as a hard cover. Write to Mr. Zalma at zalma@zalma.com;http://www.zalma.com;http://zalma.com/blog; daily articles are published athttps://zalma.substack.com.Go to the podcast Zalma On Insurance athttps://anchor.fm/barry-zalma; Follow Mr. Zalma on Twitter athttps://twitter.com/bzalma;Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921;Go to Barry Zalma on YouTube-https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg;Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library/

Judgment in Favor of Insurer Because of Plaintiff's Sloth Michelle J. Pollard, appealed from the summary judgment rendered by the trial court in favor of the defendant, Geico General Insurance Company, on the plaintiffs complaint seeking to recover underinsured motorist benefits. On appeal, the plaintiff claimed that the court improperly determined that the accidental failure of suit statute, General Statutes § 52-592 (a), did not apply to revive her otherwise time barred action. In Michelle J. Pollard v. Geico General Insurance Company, No. AC 44560, Court of Appeals of Connecticut (September 6, 2022) the defendant argued that judgment was appropriately rendered and asserted, as an alternative ground contended that the plaintiff's action was barred because she failed under the terms of the parties' insurance policy to commence suit timely or to invoke the policy's tolling provision. FACTS The plaintiff alleged that, on or about September 17, 2012, she was rear-ended by a vehicle operated by Norma Rivera while operating her automobile in a drive-through lane of a fast food restaurant in Hartford and, as a result, she suffered injuries and incurred medical expenses. She alleged that Rivera's insurer paid her the full liability limits under Rivera's automobile insurance policy such that coverage under Rivera's policy was exhausted on or about June 9, 2016. She further alleged that she had not been sufficiently compensated by Rivera's policy and that, pursuant to the insurance policy between her and the defendant, the defendant was required to provide her with underinsured motorist benefits but Geico refused. In April, 2019, the plaintiff sued Geico pursuant to the accidental failure of suit statute. The defendant filed a motion to strike counts two, three and four of the complaint, which the court granted on February 13, 2020, leaving only count one, in which the plaintiff alleged that the defendant breached the contract between the parties by failing to provide her with underinsured motorist benefits in relation to the September, 2012 collision at the fast food restaurant. Geico moved for summary judgment and contended that no genuine issue of material fact existed and that: the plaintiff could not bring the present action for underinsured motorist benefits pursuant to the accidental failure of suit statute because the nonsuit in the 2016 action was for disciplinary reasons and was not a matter of form and the plaintiff failed to bring an action within three years of the date of the accident and failed to invoke the tolling provision of the insurance policy by providing the defendant with proper written notice of a claim for underinsured motorist benefits and, therefore, the present action is time barred. The court, Cobb, J., granted the defendant's motion for summary judgment on the first ground after determining that no genuine issues of material fact existed and that, as a matter of law, the accidental failure of suit statute was not applicable. ANALYSIS According to Connecticut General Statutes § 38a-336 (g) (1), "[n]o insurance company doing business in this state may limit the time within which any suit may be brought against it ... on the . . . underinsured motorist provisions of an automobile liability insurance policy to a period of less than three years from the date of accident, provided, in the case of an underinsured motorist claim the insured may toll any applicable limitation period (A) by notifying such insurer prior to the expiration of the applicable limitation period, in writing, of any claim which the insured may have for underinsured motorist benefits and (B) by commencing suit or demanding arbitration under the terms of the policy not more than one hundred eighty days from the date of exhaustion of the limits of liability under all automobile bodily injury liability bonds or automobile insurance policies applicable at the time of the accident by settlements or final judgments after any appeals." It was undisputed that the plaintiff commenced an action for underinsured motorist benefits outside the three year limitation period. There was no genuine issue of material fact that the plaintiff failed to provide the defendant with written notice of her intention to pursue an underinsured motorist claim as required by part (a) of the tolling provision of the insurance policy. The October 1, 2012 letter, which was sent from John A. Sodipo from Jacobs & Sodipo, LLC, to the defendant, which plaintiff claimed allowed her suit to go forward, yet the letter contained no reference to a potential claim for underinsured motorist benefits. The trial court determined that the notice was insufficient to comply with the requirements of the policy, and that the notice requirement in the policy contemplates specific reference to a potential claim for underinsured motorist benefits. That language plainly and unambiguously requires the insured to inform its insurer not merely that it is pursuing a claim, but rather that it is pursuing a claim for underinsured motorist benefits. The insurance company needs to be notified in writing that there's the possibility that a claim will be brought for underinsured motorist coverage. In the present case, the court concluded that no genuine issues of material fact exist regarding the plaintiffs failure to satisfy part (a) of the policy's tolling provision. The October 1, 2012 letter stated only a potential claim, in general, and did not specifically state that the plaintiff may have a claim for underinsured motorist benefits. Geico satisfied its burden for summary judgment with respect to both the three year limitation period, which was undisputedly not met, and the statute's tolling provision, the tolling provision of the insurance policy requires both that the plaintiff (1) provide written notice to the defendant within three years of the date of the accident that she may have a claim for underinsured motorist benefits and (2) commence an action within 180 days from the date of exhaustion. Because both requirements of the tolling provision must be satisfied, the failure to meet either requirement renders the tolling provision inapplicable. Accordingly, Geico demonstrating that, as a matter of law, the October 1, 2012 letter failed to satisfy the requirements of a written notice of a claim for underinsured motorist benefits under part (a) of the policy's tolling provision, was entitled to summary judgment. The grant of the motion for summary judgment on the ground that no genuine issues of material fact exist that the plaintiff failed to bring suit within three years and failed to toll that limitation period in accordance with the insurance policy was obvious and necessary. ZALMA OPINION There is no excuse to sit on your rights for underinsured motorist coverage for more than six years. Simply stated an insured loses the right to the benefits of an insurance policy by sitting on those rights past the private limitation of action provision of the policy and by failing to comply with the statute that allows you to toll the limitation period. (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 and zalma@zalma.com. Subscribe and receive videos limited to subscribers of Excellence in Claims Handling at locals.com https://zalmaoninsurance.locals.com/subscribe. Subscribe to Excellence in Claims Handling at https://barryzalma.substack.com/welcome. Write to Mr. Zalma at zalma@zalma.com; http://www.zalma.com; http://zalma.com/blog; daily articles are published at https://zalma.substack.com. Go to the podcast Zalma On Insurance at https://anchor.fm/barry-zalma; Follow Mr. Zalma on Twitter at https://twitter.com/bzalma; Go to Barry Zalma 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/

Apple Annie Suffered no Direct Physical Damage It's Time to Quit Trying to Get Business Interruption Payments from Insurers for Covid The COVID pandemic and ensuing lock down have generated a host of legal issues. One of the most momentous, in terms of the potential monetary liability, is whether businesses ordered by government decree to close or suspend operations could get compensation under the business income coverage of the standard comprehensive commercial liability policy. The issue has generated opinions from different Courts of Appeal, all of which have held that the issue comes down to whether the insured can allege it suffered "direct physical loss of or damage to [the insured] property." Having lost in the trial court, the insured here told the court that "this appeal can be viewed as a referendum on whether [those] decisions were correctly decided." They were right but not as they expected. In Apple Annie, LLC v. Oregon Mutual Insurance Company, A163300, California Court of Appeals, First District, Second Division (September 2, 2022) the California Court of Appeal refused to be swayed by the Marina Pacific decision. BACKGROUND At all relevant times, plaintiff Apple Annie, LLC, operated restaurants in Marin, San Francisco, and Santa Barbara counties. Defendant Oregon Mutual Insurance Company issued Apple Annie a comprehensive commercial liability and property insurance policy that, as relevant here, promised in general to "pay for direct physical loss of or damage to Covered Property at the [insured] premises," and in particular to "pay for the actual loss of Business Income you sustain due to the necessary suspension of your 'operations' during the 'period of restoration. The suspension must be caused by direct physical loss of or damage to property at the described premises. The loss or damage must be caused by or result from a Covered Cause of Loss." According to Apple Annie's complaint, in March 2020, first the Marin and San Francisco Departments of Public Health, and then the Governor, issued "Shelter in Place orders,” which Apple Annie alleged "caused [it] to suspend business operations at all its locations, which resulted in an immediate loss of business income." Oregon Mutual denied Apple Annie's claim for its "business income loss." DISCUSSION After a comprehensive survey of the subject, the court concluded that a business that closed pursuant to a government shut-down order had not suffered "direct physical . . . damage to" the business's property. This was a matter of plain English: "The words in the phrase 'direct physical damage' all have commonly understood meanings. 'Physical' is defined as 'having material existence: perceptible especially through the senses and subject to the laws of nature.' [Citation.] 'Direct' is defined as 'proceeding from one point to another in time or space without deviation or interruption,' 'stemming immediately from a source,' and 'characterized by close logical, causal, or consequential relationship.' The presence of COVID-19 on Plaintiff's property did not cause damage to the property necessitating rehabilitation or restoration efforts similar to those required to abate asbestos or remove poisonous fumes which permeate property. Instead, all that is required for Plaintiff to return to full working order is for the [government orders and restrictions to be lifted. This case . . . concerns an invisible virus that is present throughout the world. . . . It is that general presence, and not a specific physical harm to covered properties, that has caused governments at all levels to consider restrictions. The question, therefore, is one of 'widespread economic loss due to restrictions on human activities, not the consequence of a direct physical loss or damage to the insured premises. (Inns-by-the-Sea) Apple Annie contends that "because the phrase 'physical loss of or damage to' is phrased disjunctively, 'loss of' and 'damage to' must each be given a separate meaning." Apple Annie reasoned: "Because of this disjunctive framing, each concept must be accorded a separate, distinct meaning. An interpretation of 'loss of' that assigns it the same meaning as 'damage to' would do violence to the language of the policy by rendering the former term surplusage." By contrast, the losses here arose from closures intended to limit the spread of a virus that can carry great risk to people but no risk at all to a physical structure. The Court of Appeal decided to follow the reasoning of Inns-by-the-Sea and similar cases in acknowledging 'the generally recognized principle in the context of first party property insurance that mere loss of use of physical property to generate business income, without any other physical impact on the property, does not give rise to coverage for direct physical loss. As the United States District Court, Southern District of California stated, that if, for example, a sick person walked into one of Plaintiffs' restaurants and left behind COVID-19 particulates on a countertop, it would strain credulity to say that the countertop was damaged or physically altered as a result. The majority of cases in California (and elsewhere) are in accord. Most recently, on July 13, Division Seven of the Second District filed its opinion in Marina Pacific Hotel & Suites, LLC v. Fireman's Fund Ins. Co. (2022) 81 Cal.App.5th 96 (Marina Pacific). The Court of Appeal went on to hold for the plaintiff insured, on the basis it had pled the element missing from the three earlier cases: it "adequately alleged direct physical loss or damage." Thus, the court held, Marina Pacific stated a claim for breach of the insurance policy (Marina Pacific, supra, at p. 108), and concluded: "Because the insureds adequately alleged losses covered by Fireman's Fund's policy, they are entitled to an opportunity to present their case, at trial or in opposition to a motion for summary judgment. The judgment of dismissal based on the trial court's disbelief of those allegations, whether ultimately reasonable or not, must be reversed." In sum, and in light of the foregoing, the Court of Appeal could not agree with Apple Annie's primary contention that the policy language-"direct physical loss or damage to," including its disjunctive phrasing-is ambiguous and "subject to a reasonable construction that supports coverage." Doing so, the Court of Appeal rejected what may be the two most consequential aspects of Apple Annie's position: that "no physical alteration is necessary to show that the policyholder has suffered a 'physical loss of' insured property if the governmental authorities issue orders that prohibit the policyholder from using the insured property for its intended purpose," and that" 'physical loss of' includes the loss of use of the insured property, even if that loss is temporary." (See Santo's Italian Cafe LLC v. Acuity Ins. Co., supra, 15 F.4th 398, 402 ["A loss of use simply is not the same as a physical loss"].) Although the COVID virus has a physical presence, and thus Apple Annie may have suffered economic loss from the physical presence of the COVID virus, it has not suffered direct physical loss of or damage to [its] property. Apple Annie makes a new argument using a definition in the liability portion of the policy. A similar argument was made, and rejected, in United Talent Agency, which observed that cases involving comprehensive liability coverage are of limited benefit in determining the scope of property insurance coverage. While Marina Pacific held for the insured, based on its pleading, in its supplemental brief Apple Annie acknowledges that the case does not directly implicate Apple Annie's theory of coverage. At oral argument the Court of Appeal asked counsel for Apple Annie - able counsel with significant experience in insurance coverage issues-what Apple Annie would, or could allege. Given that, the fact that this case has been pending for 25 months, and the further fact that Marina Pacific has been extant for over a month, the court concluded that Apple Annie has not met the burden required of it to obtain leave to amend, and thus the Court of Appeal denied the belated request. ZALMA OPINION As I said when I digested the Marina Pacific case, the decision was limited to whether the plaintiff had alleged a cause of action and since they alleged that there was direct physical damage they were entitled to try to prove it. Since this case was not brought on a demurrer's finding the lack of direct physical damage defeated the claim for business interruption like all of the other cases across the country. (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 and zalma@zalma.com. Subscribe and receive videos limited to subscribers of Excellence in Claims Handling at locals.com https://zalmaoninsurance.locals.com/subscribe. Subscribe to Excellence in Claims Handling at https://barryzalma.substack.com/welcome. Write to Mr. Zalma at zalma@zalma.com; http://www.zalma.com; http://zalma.com/blog; daily articles are published at https://zalma.substack.com. Go to the podcast Zalma On Insurance at https://anchor.fm/barry-zalma; Follow Mr. Zalma on Twitter at https://twitter.com/bzalma; Go to Barry Zalma 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/

FLOOD EXCLUSION APPLIES TO DEFEAT CLAIM Insured Admits Loss Caused by Flood Sufficient to Deny Claim Virginia Sosa appealed from the county court's orders granting summary judgment in favor of appellee Auto Club Indemnity Co. ("Auto Club") and denying Sosa's motion for new trial. The court granted summary judgment on several grounds raised by Auto Club, including that Sosa's claims were barred by limitations and by the exclusion in her homeowner's insurance policy for damages caused by flood and surface water. In Virginia Sosa v. Auto Club Indemnity Co., No. 01-21-00312-CV, Court of Appeals of Texas, First District (August 30, 2022) the Court of Appeal resolved the dispute because Sosa did not, challenge the summary judgment ground that her claims were caused by flood or surface water, which is expressly excluded from coverage under her homeowner's policy. BACKGROUND Sosa's house was damaged during Hurricane Harvey on August 26, 2017. Shortly thereafter, Sosa filed a claim with Auto Club, which insured her house. Sosa reported that two feet of floodwater had entered her home, her roof was missing shingles and was leaking, and she had sustained interior damage. Auto Club determined that her damage was caused by flood water, which was expressly excluded from coverage under Sosa's homeowner's insurance policy that was in effect during Hurricane Harvey. On September 26, 2017, Auto Club denied her claim. On November 11, 2020, almost three years after the denial and more than three years after the damage, Sosa filed suit against Auto Club for breach of the insurance policy. Sosa filed a first amended petition, which was her live pleading when the county court entered summary judgment against her. Sosa's amended petition was identical to her original petition except that it changed the date of loss from August 26, 2017, to June 28, 2019. AUTO CLUB'S MOTION FOR SUMMARY JUDGMENT Auto Club filed a traditional motion for summary judgment arguing that it was entitled to judgment as a matter of law on several grounds effective grounds. Auto Club argued that Sosa's claims are time barred by the two-year-and-one-day limitations period contained in Sosa's policy because Sosa filed the lawsuit more than three years after her claims accrued, and that Sosa's policy did not cover loss from flood or surface water, which it contended was the basis of Sosa's claimed damage. COUNTY COURT'S RULING AND MOTION FOR NEW TRIAL The county court granted Auto Club's summary judgment motion. The court also found that Auto Club had disproved several elements of Sosa's breach of contract action; flood and surface water damages were not covered under the policy; and all flood and surface water damages were excluded from coverage. The court ordered that Sosa take nothing and dismissed her claims with prejudice. SUMMARY JUDGMENT Sosa, as an appellant must challenge each independent ground that could fully support the trial court's challenged ruling. When an unchallenged ground supports a complained-of ruling or judgment, the Court of Appeal must accept the validity of that unchallenged independent ground, and thus any error in the grounds challenged on appeal is harmless because the unchallenged independent ground fully supports the complained-of ruling or judgment. Auto Club sought summary judgment on four grounds. Auto Club argued that Sosa's claimed damages were excluded from coverage under the homeowner's policy, and therefore it was not liable for her damages. Auto Club argued that Sosa's claims were time barred. Auto Club argued that its evidence disproved several elements of Sosa's breach of contract claim. Auto Club argued that Sosa's extracontractual claims were not viable in the absence of a breach of contract. The Failure to Dispute a Ground for Summary Judgment On appeal, Sosa challenged only three of the four grounds. Sosa did not challenge the summary judgment order on the ground that her claimed damages were covered under the policy. Indeed, her appellate brief does not mention flood or surface water. A policy provision that excludes claimed damages is an independent ground that supports dismissal of such claims. Because Sosa's claims are contractual in nature and Auto Club's liability for her claims flows from the homeowner's policy, Auto Club is not liable for damages that are expressly excluded under the insurance policy. The appellate court concluded that it need not decide whether summary judgment is meritorious on all stated grounds in order to affirm. Because Sosa did not challenge the ruling on appeal the flood exclusion ground independently supports summary judgment in Auto Club's favor. Any other error about which Sosa complained on appeal is harmless considering the unchallenged ground supporting the summary judgment order. Because summary judgment was proper the county court did not abuse its discretion by denying her motion for new trial. Summary judgment was proper. The Court of Appeal concluded that the county court did not act arbitrarily, unreasonably, or without reference to guiding rules or principles in denying Sosa's motion for new trial. The trial judgment was affirmed. ZALMA OPINION The facts established that Auto Club had four viable grounds for summary judgment, one of which Sosa did not dispute nor even mention in her appellate briefing. As a result the Court of Appeal had no choice but to affirm the decision of the County Court because her pleadings admitted that the Auto Club's position was correct. That she tried to cheat by changing the date of loss was contumacious but, in effect, a wasted effort that should have been sanctioned. (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 athttp://www.zalma.comandzalma@zalma.com. Subscribe and receive videos limited to subscribers of Excellence in Claims Handling at locals.comhttps://zalmaoninsurance.locals.com/subscribe. Subscribe to Excellence in Claims Handling athttps://barryzalma.substack.com/welcome. Now available Barry Zalma's newest book, The Tort of Bad Faith, available here. The new book is available as a Kindle book, a paperback or as a hard cover. Write to Mr. Zalma at zalma@zalma.com;http://www.zalma.com;http://zalma.com/blog; daily articles are published athttps://zalma.substack.com.Go to the podcast Zalma On Insurance athttps://anchor.fm/barry-zalma; Follow Mr. Zalma on Twitter athttps://twitter.com/bzalma;Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921;Go to Barry Zalma on YouTube-https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg;Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library/

When You Win it is Best to Shut Up and Accept It As a young lawyer one of the first things I learned was never argue with a judge whose tentative ruling is to grant your motion. Insurers often seek, when there is a dispute of insurance coverage, declaratory relief from the court about its duty to defend or indemnify the insured. However, when there is no claim, it is a waste of the time of counsel, the insured and the courts to bring a declaratory relief action. The axiom to never argue over a win was explained by the USDC for the Eastern District of Virginia, in Hanover Insurance Company, et al. v. C. David Venture Management, LLC, et al., Civil Action No. 1:21-cv-790 (RDA/JFA), United States District Court, E.D. Virginia, Alexandria Division (August 30, 2022). Hanover sought a ruling it owed neither defense nor indemnity to the defendants. The defendants, David Venture Management, LLC and Venture Street, LLC's (“Defendants”) moved to dismiss The Hanover American Insurance Company's (“Plaintiffs” or “Hanover”) suit. BACKGROUND The lawsuit for Declaratory Judgment implicates Hanover's potential duties to defend or indemnify Defendants in a putative class action brought in the U.S. District Court for the District of Colorado. Beginning on December 9, 2017, Hanover issued the first of several Commercial General Liability (“CGL”) policies to CDVM. Hanover also issued Commercial Follow Form Excess and Umbrella Policies (“Excess/Umbrella Policy”) for the same effective dates. Defendant Venture Street was added as an additional named insured on the CGL and Excess/Umbrella Policy effective May 29, 2019. Plaintiffs in the putative class action, styled In Re HomeAdvisor, Inc. Litigation, Civil Action No. 16-CV01849 (“the HomeAdvisor lawsuit”), filed suit on July 16, 2019. The plaintiffs in the HomeAdvisor lawsuit have amended their complaint several times and continue to assert claims against Defendants CDVM and Venture Street. After Defendants were named in the HomeAdvisor lawsuit, they provided notice of the litigation to Plaintiff Hanover. On November 12, 2019, Hanover responded to the notice by denying Defendants insurance coverage for the HomeAdvisor Lawsuit. Defendants sought reconsideration from Hanover on January 29, 2020, and again on April 23, 2021, but Hanover reaffirmed its coverage denial. Plaintiffs filed suit on July 6, 2021, seeking a declaration that they owe no duty to defend or indemnify Defendants in the HomeAdvisor Lawsuit. Plaintiffs maintain that “[t]here is no coverage available for the claims asserted against [Defendants] CDVM and Venture Street in the HomeAdvisor Lawsuit” for multiple reasons. Specifically, Plaintiffs alleged that insurance coverage is unavailable because “[t]he claims do not allege damages because of ‘bodily injury' or ‘property damage' caused by an ‘occurrence' within the meaning of the CGL or Excess/Umbrella Policies”; “[t]he claims do not allege damages because of ‘personal and advertising injury' within the meaning of the CGL Policies”; “[t]he claims do not allege damages because of ‘advertising injury' or ‘personal injury' within the meaning of the Excess/Umbrella Policies”; the alleged acts were not committed, and the alleged injuries did not occur, during the relevant policy periods; and several exclusions bar coverage, including exclusions for “Expected or Intended Injury Knowing Violation of the Rights of Another; Infringement of Copyright, Patent, Trademark or Trade Secret; Insureds In Media And Internet Type Businesses; and Personal and Advertising Injury.” Defendants, in response, notified Plaintiffs that they were no longer seeking coverage from Plaintiffs for the HomeAdvisor lawsuit on July 19, 2021. On August 16, 2021, Defendants affirmed that they had withdrawn their request for coverage from Hanover. Through counsel, Defendants communicated the details of their withdrawal to Plaintiffs RIPENESS AND DECLARATORY RELIEF The Declaratory Judgment Act authorizes federal courts to review claims for declaratory relief. The animating purpose of a declaratory judgment remedy is to guide parties in their future conduct in relation to each other, thereby relieving them from the risk of taking undirected action incident to their rights. The doctrine of standing is grounded in the Constitution's limits on the Article III judicial power. Ripeness, another justiciability doctrine, determines when a case or controversy is fit for federal judicial review. A claim is not ripe for adjudication if it rests upon contingent future events that may not occur as anticipated, or indeed may not occur at all. A declaratory claim is only ripe for judicial resolution when the facts alleged, under all the circumstances, show that there is a substantial controversy between parties having adverse legal interests of sufficient immediacy and reality to warrant the issuance of a declaratory judgment. PLAINTIFFS' CLAIM FOR DECLARATORY RELIEF Plaintiffs' Complaint seeks a declaration that Hanover owes no duty to defend or indemnify Defendants in the HomeAdvisor lawsuit. However, Defendants notified Plaintiffs that they were withdrawing their claim for insurance coverage related to the HomeAdvisor lawsuit. The facts of this case do not call for declaratory relief on either the duty to defend or duty to indemnify questions. Critically, Defendants no longer seek coverage under the relevant insurance policies for defending against the HomeAdvisor lawsuit. As a result, there is not a live question regarding Plaintiffs' duty to defend Defendants in that litigation. If Plaintiffs do not deny Defendants coverage in defending against a potential future amended complaint in the HomeAdvisor lawsuit Defendants-or if Defendants never again seek such coverage-then a decision from this Court concerning Plaintiffs' duty to defend will have no effect. Were the Court to interpret the relevant CGL and Excess/Umbrella policies' language regarding a duty to defend at this juncture, such a ruling would be premature and therefore tantamount to an advisory opinion in contravention of Article III. Similarly, Plaintiffs' duty to indemnify Defendants under the relevant CGL policies is not ripe for resolution. Whether Defendants should be indemnified by Plaintiffs against liability for injuries “would depend in the first place upon whether [Defendants] are found to be liable for the” conduct alleged in the HomeAdvisor lawsuit, but “[that question cannot be answered at this time.” Thus, this Court cannot at this time exercise its prerogative under 28 U.S.C. § 2201 to issue a declaratory judgment on the indemnity question. Defendants' Motion to Dismiss was granted. Plaintiffs' Complaint was dismissed without prejudice. ZALMA OPINION In this case Hanover denied defense and indemnity to the defendants who, after some discussion, withdrew their claims. With no claim pending - only a potential for a future claim - Hanover refused to accept the fact that it had won the argument about the availability of coverage for defense or indemnity and filed a complaint for declaratory relief seeking the order of the court that the decision of the defendants not to seek defense or indemnity was correct and preventing them from changing their mind. (c) 2022 Barry Zalma & ClaimSchool, Inc. Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 54 years in the insurance business. He is available at http: //www.zalma.com and zalma@zalma.com. Subscribe and receive videos limited to subscribers of Excellence in Claims Handling at locals.com https://zalmaoninsurance.locals.com/subscribe. Subscribe to Excellence in Claims Handling at https://barryzalma.substack.com/welcome. Write to Mr. Zalma at zalma@zalma.com; http://www.zalma.com; http://zalma.com/blog; daily articles are published at https://zalma.substack.com. Go to the podcast Zalma On Insurance at https://anchor.fm/barry-zalma; Follow Mr. Zalma on Twitter at https://twitter.com/bzalma; Go to Barry Zalma 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/

Making Sick Horse Well is not a Breach of Horse Mortality Policy The parties sued over an insurance dispute concerning a champion show horse named Thomas. Thomas is alive and well, but Thomas's owner, Julie Greenbank, sued her insurer, Great American Assurance Company, for failing to provide mortality coverage for Thomas. In Julie Greenbank v. Great American Assurance Company, No. 21-2622, United States Court of Appeals, Seventh Circuit (August 30, 2022) Greenbank alleged that Great American breached the insurance policy and acted in bad faith by unreasonably withholding consent for Thomas's authorized humane destruction, opting instead to perform a tenotomy that destroyed Thomas's use as an athletic show horse. She also alleged that Great American's continued care and control over Thomas, long after the policy terminated, constitutes conversion and theft. The district court dismissed her claims at summary judgment, and Greenbank appealed. THE INSURANCE POLICY In September 2017, Greenbank purchased an American Saddle bred gelding horse named Awesome whose barn name was "Thomas" for $500,000. Greenbank intended to use Thomas as an athletic show horse for competitive purposes. Shortly after this purchase, Greenbank obtained a mortality insurance policy with Great American for Thomas's full purchase price. The policy provided coverage in the event of Thomas's "death" or "authorized humane destruction." Under the policy, a horse's death or authorized humane destruction must result, in part, from an illness, injury, or specific surgery. To obtain coverage in the event of Thomas's death or authorized humane destruction, the policy required Greenbank to meet certain conditions precedent. One condition precedent required Greenbank to immediately notify Great American if Thomas becomes ill. The policy notes that failure to provide immediate notice of Thomas's illness "will invalidate any claim under the policy." If Thomas becomes ill, the policy allows Great American to, with Greenbank's permission, assume control over Thomas's treatment. In addition to mortality coverage, the policy also includes a "Major Medical Endorsement" (MME) and a "Guaranteed Renewal Endorsement" (GRE). THOMAS' HEALTH In December 2017, Greenbank boarded Thomas at Cedarwood Farms in Evansville, Indiana, to begin training with Chuck Herbert. In February 2018, however, Thomas became sick with colic and pneumonia. Thomas lost 50 pounds, and developed cellulites in all four legs and uveitis in his eye. Based on this, Dr. Stone determined that Thomas was "very sick." On top of this, Thomas later pulled his right stifle, rendering him lame in his right hind; Thomas's ability to get up and down was compromised. Greenbank reported Thomas' pneumonia to Great American. After hearing from a vet that Thomas might need to be euthanized, Great American, pursuant to the policy, retained its own veterinarians to provide treatment for Thomas. Eventually, Thomas was transported to Hagyard Equine Medical Institute, a facility in Lexington, Kentucky, where Dr. Kathy MacGillivray became Thomas's primary veterinarian. Dr. MacGillivray evaluated Thomas and determined that Thomas suffered from a deep lung abscess and severe laminitis. Dr. MacGillivray advised that based on Thomas's declining health, it would not be unreasonable to make a euthanasia recommendation. She wanted to try treatment first, before recommending euthanasia. Thomas received treatment for his deep lung abscess first, followed by his severe laminitis. For the latter condition, veterinary podiatry specialist Dr. Brian Fraley recommended that Thomas undergo a tenotomy, which involves a one-inch incision and cutting the deep flexor tendon to restore blood flow and relieve pressure on the coffin bone. Greenbank objected to Thomas's tenotomy on the basis that it would destroy Thomas's future athleticism as a show horse; she requested more conservative treatments. But Dr. Fraley advised that the tenotomy was Thomas's only chance of regaining any athletic ability, because, after a tenotomy, the tendon would eventually heal and become functional. Dr. Fraley performed Thomas's tenotomy, and as he would later testify, Thomas's tenotomy went well and Thomas had a "remarkable" recovery. Within a year after his surgery, Thomas gained back his weight and returned to trotting, bucking, running, and galloping around the Pine Ridge Farm, where he now resides. GREAT AMERICAN'S POLICY ACTIONS Greenbank's policy expired on September 28, 2018. To renew the policy under the GRE, she submitted a payment of $14,725.000. Great American however, denied the policy renewal based on Greenbank's failure to meet several conditions precedent, including providing Great American with immediate notice of Thomas's illness in February 2018. Though the policy has terminated, Great American continues to care for and maintain control of Thomas. Greenbank's Lawsuit Dismissed at Summary Judgment The district court determined that Great American did not breach the policy because there was no covered cause of loss-Thomas did not die by natural causes or authorized humane destruction. Breach of Contract Greenbank argued that Great American breached the insurance policy but failed to show that Great American breached the insurance. Mortality Coverage The mortality insurance policy at issue provides coverage in the event of Thomas's "death" or "authorized humane destruction." There is no dispute that Thomas did not die naturally or by authorized humane destruction. That alone should end the inquiry into whether Great American breached a mortality insurance contract. Thomas saw three veterinarians over a period of five months, and during that time, no veterinarian suggested that Thomas needed to be euthanized, let alone certified that fact to Great American. The possibility of euthanasia is neither certification nor a determination that immediate euthanasia was imperative for humane reasons. There was no evidence that Great American expressly agreed to euthanize Thomas and nothing in the policy required it to do so. Nothing in the contract says that Great American was expected to protect Thomas's use as a show horse. To protect against Thomas's use as a show horse, Greenbank could have sought a loss of use policy. She cannot now attempt to turn a mortality insurance policy into a loss of use policy by claiming that Great American unreasonably withheld authorized humane destruction. BAD FAITH In addition to her breach of contract claims, Greenbank argues that Great American acted in bad faith based on several policy actions relating to (1) the mortality coverage and (2) the GRE. Mortality Coverage Great American did not wrongly deny mortality coverage, therefore, Greenbank is unable to show bad faith as to this claim. Just because Great American did not choose the medical route Greenbank desired, or otherwise resolve the claim to her liking, does not mean Great American acted in bad faith. GRE Renewal Because Greenbank failed to show that Great American breached the contract under the GRE, her bad faith claim fails for this reason as well. Conversion and Theft Tortious conversion, or common law conversion, is either "the appropriation of the personal property of another to the party's own use and benefit. A plaintiff claiming tortious conversion must establish that he or she owned the property, and that the defendant's possession was unauthorized or without consent. Where the defendant's initial possession of plaintiff's property is lawful, conversion occurs only after an unqualified demand for return, unless such demand would be futile. There is no dispute that Great American's initial possession and control of Thomas was lawful based on the policy. The district court denied the motion. It is unusual that Great American maintained control of Thomas long after the policy terminated. Greenbank, however, has failed to demonstrate that Great American's control of Thomas falls within the bounds of common law conversion, because of a very important fact-she never demanded Thomas, and she has failed to show that any demand for Thomas would have been futile. Statutory Conversion and Theft Unlike tortious conversion, statutory conversion does not require a plaintiff to demand a return. Although a demand for return is not required, a plaintiff must present evidence to raise a reasonable inference that the defendant was aware that their possession was unauthorized. Contrary to the allegations no evidence exists for a jury to determine that Great American knowingly or intentionally exercised unauthorized control over Thomas. This is especially true when Greenbank's counsel specifically stated during a telephonic court conference that Great American could keep Thomas: When the magistrate judge asked, "Do you want the horse or not?," Greenbank's counsel replied, "No, as far as we are concerned, they can keep it." With no evidence that Great American knew that their continued control of Thomas was purportedly unauthorized, Greenbank's statutory conversion and theft claims fail. The judgment of the District Court was affirmed. ZALMA OPINION A horse owner upset because the insurer saved the life of the horse, at its expense, and the horse is now alive and well, is counter-intuitive. Most horse owners want their horse to live and be well. In this case the insured wanted the horse dead because she could recover $500,000. She would recover nothing if veterinarians paid for by the insurer brought the horse back to health. The Seventh Circuit dealt with all of the Plaintiff's specious arguments especially when she refused possession of her half-million dollar horse who is now well and acting like a healthy horse. (c) 2022 Barry Zalma & ClaimSchool, Inc. Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 54 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com. Subscribe and receive videos limited to subscribers of Excellence in Claims Handling at locals.com https://zalmaoninsurance.locals.com/subscribe. Subscribe to Excellence in Claims Handling at https://barryzalma.substack.com/welcome. Write to Mr. Zalma at zalma@zalma.com; http://www.zalma.com; http://zalma.com/blog; daily articles are published at https://zalma.substack.com. Go to the podcast Zalma On Insurance at https://anchor.fm/barry-zalma; Follow Mr. Zalma on Twitter at https://twitter.com/bzalma; Go to Barry Zalma 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/

Volume 26, Issue 17 - September 1, 2022 The issue, available as a 25 page .pdf document here ZIFL-09-01-2022 The issue includes articles including: Public Adjuster Firm Accused of Pocketing $600,000 in Insurer Payouts in 2 States Andrew Joseph Mitchell, according to the Texas Department of Insurance, who reported that a public adjusting firm that was sanctioned last month by Louisiana regulators has pocketed more than $300,000 in insurer payouts intended for Texas property owners. Michigan Allows Fraudster to Receive PIP Benefits but no UM/UIM Benefits Plaintiff appealed the trial court’s order granting summary disposition in favor of defendants Home-Owners Insurance Company (“Home-Owners”), American Country Insurance Company (ACIC), and Hartford Accident and Indemnity Company (“Hartford”), with respect to plaintiff’s claims for uninsured or underinsured motorist benefits and first-party personal protection insurance (PIP) benefits under the no-fault act, MCL 500.3101 et seq. Although defendants disputed their priority to pay PIP benefits, the trial court did not decide the priority issue, but instead dismissed all claims on the basis of antifraud provisions in defendants’ respective policies. In Jonathan Jones v. Home-Owners Insurance Company, American Country Insurance Company, And Hartford Accident & Indemnity Company, and Sharneta Henderson, No. 355118, Court of Appeals of Michigan (August 18, 2022) the Court of Appeal produced a Solomon-like decision. The Law Applies to Thee but not to Me – Insurance Fraud Pays in New York Oneatha Swinton, the former acting principal of Port Richmond High school in Staten Island, New York, convicted of car insurance fraud kept her employment with the New York Department of Education – and even got a raise – despite what school investigators called her “pattern of dishonesty.” The DOE gave Swinton, a deal to stay on despite the criminal conviction plus findings that she improperly funneled $100,000 in school funds to a vendor, and “failed to safeguard” 600 DOE computers, printers and laptops which vanished under her watch. California Claims Regulations Fair Claims Settlement Practices Regulations 2022 If You Haven’t Complied by Today You are in Violation Insurers licensed or operating in California must ascertain that their entire claims staff has read, understood or be trained about the California Fair Claims Settlement Practices Regulations by September 1 of Each Year and be ready to swear under oath that the Regulation has been complied with by the insurer. Before Electing to Rescind Bases for Rescission The primary bases for rescission are: misrepresentation or material fact(s), concealment of material fact(s), mistake of material fact(s), mistake of law, or fraud. New York StateWide Senior Action Council Announces It's Medicare Fraud of the Month Telemedicine Fraud. "Telemedicine Fraud, often called Telehealth Fraud is a growing trend in Medicare. The COVID-19 pandemic created unprecedented challenges for how patients accessed health care with the need for social isolation leading to an explosion in remote Telemedicine care," statedMaria Alvarez, Executive Director of StateWide in announcing this month's Medicare Fraud of the Month. The StateWide Fraud of the Month is a component of the Senior Medical Patrol, the definitive resource for New York State's senior citizens and caregivers to help detect, prevent, and report Medicare fraud and waste. StateWide is New York's grantee/administrator for this Federal Program. Good News From the Coalition Against Insurance Fraud Ricky Gonzales ran Ricky’s Construction Company, which supplied construction labor for contractors. The Tampa, Fla.-area man lied he paid workers’ compensation for the laborers he provided — who were undocumented immigrants. The contractors then sent Gonzales what they thought were payroll checks. Gonzales cashed the checks at banks to pay the workers. Gonzales lied that employees had full worker's comp. In truth, he received and cashed more than $7M of checks from construction contractors for his employees. That far exceeded the limited payroll that Gonzales reported to his comp insurer. His employees thus worked at job sites without adequate insurance coverage. The insurers lost premiums they would’ve charged had they known the true number of workers their policies were being manipulated to cover. Gonzalez also illegally avoided state and federal payroll taxes. He pled federally guilty and faces up to 25 years in prison when sentenced. And many more convictions. Health Insurance Fraud Convictions South Bay Chiropractor Sentenced to Prison for Receiving Kickbacks A Redondo Beach chiropractor was sentenced to 14 months in prison for soliciting kickbacks from other hospitals.(Shutterstock) Brian Carrico, 68, of Redondo Beach, was sentenced August 26, 2022 to 14 months in federal prison by U.S. District Judge Josephine L. Staton, who also ordered him to pay a fine of $25,000. The South Bay chiropractor was sentenced for taking kickbacks from Pacific Hospital — a medical center in Long Beach whose then-owner was later imprisoned — and for soliciting kickbacks from another Southern California hospital. Carrico pleaded guilty in February to one count of soliciting kickbacks — the same day his two Redondo Beach-based companies, Performance Medical & Rehab Center Inc. and One Accord Management Inc. — each pleaded guilty to one count of conspiracy to solicit kickbacks. And dozens more convictions. Zalma on Insurance at Locals.com Excellence in Claims Handling Create a Staff of Professional Claims Handlers Click Here to Subscribe to the Excellence in Claims Handling Programs for Each of Your Claims Personnel for Only $5 A Month Or $50 A Year by Subscribing to Zalma on Insurance at Locals. Florida Sting Operation Busted 13 Contractors Without Workers’ Comp In an attempt to save the few remaining insurers doing business in Florida, the state has taken aim at unlicensed contractors who some claim have increased the cost of repair to property in Florida. Other Insurance Fraud Convictions Florida Staffing Firm Head Sentenced to 24 Years for Off-Book Labor Scheme Mykhaylo Chugay from 2007 to 2021 according to federal prosecutors said, operated a number of shady staffing companies in south Florida that avoided paying more than $25 million in federal taxes. Last week, a federal judge sentenced Chugay to 24 years in prison for his June conviction on crimes that included fraud, harboring illegal aliens and money laundering, according to prosecutors and news reports. Plus many more convictions. Insurance Fraud in the U.K. On August 25, 20200 the Association of British Insurers and the Insurance Fraud Bureau Announced: The number and cost of fraudulent claims fell in 2021, but the average scam uncovered at a record level of over £12,000. Motor insurance claim fraud still the most common insurance con. Barry Zalma, Esq., CFE Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 54 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com. Over the last 54 years Barry Zalma has dedicated his life to insurance, insurance claims and the need to defeat insurance fraud. He has created the following library of books and other materials to make it possible for insurers and their claims staff to become insurance claims professionals. Barry Zalma, Inc., 4441 Sepulveda Boulevard, CULVER CITY CA 90230-4847, 310-390-4455; Subscribe to Zalma on Insurance at locals.com https://zalmaoninsurance.local.com/subscribe. Subscribe to Excellence in Claims Handling at https://barryzalma.substack.com/welcome. Write to Mr. Zalma at zalma@zalma.com; http://www.zalma.com; http://zalma.com/blog; I publish daily articles at https://zalma.substack.com, Go to the podcast Zalma On Insurance at https://anchor.fm/barry-zalma; Follow Mr. Zalma on Twitter at https://twitter.com/bzalma; Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921

Convicted of Acting as a Pill Mill & Doubling as an Insurance Fraud Scheme

A Lawyer Should Never Sue an Insurer When There is Obviously no Coverage This case involves an insurance dispute in which Appellant, Benjamin G. Dusing (Dusing), alleges that a 2016 leased Mercedes was properly insured by Appellee, Metropolitan Property & Casualty Insurance Company (Metropolitan). Metropolitan disclaims coverage for the vehicle, which was destroyed by fire on June 25, 2016. In Benjamin G. Dusing v. Metropolitan Property & Casualty Insurance Company, No. 2021-CA-0200-MR, Court of Appeals of Kentucky (August 26, 2022) Dusing claimed he was driving the vehicle at the time it caught fire. As a of Metropolitan’s refusal to pay Dusing sued for declaratory judgment in Kenton Circuit Court on June 21, 2017. The court subsequently granted what is styled as Metropolitan's "Motion for Judgment," on the basis that there was no coverage pursuant to the terms of insurance policy with Metropolitan (hereafter, the Policy). A motion for summary judgment should be granted if the pleadings, depositions, answers to interrogatories, stipulations, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law. THE POLICY The Policy at issue here provides the following relevant terms: We will pay for loss to your covered automobile or to a non-owned automobile, including its equipment, not caused by collision, minus any applicable deductible shown in the Declarations. Coverage is included for a loss caused by but not limited to the following: * * * 2. Fire, explosion or earthquake . . . . The Policy defines "non-owned automobile" as: 1. an automobile or trailer while being used by you or a relative, with the owner's permission, which is not owned by, furnished to, or made available for regular use to you or any resident in your household. 2.a commercially rented automobile or trailer used by you or a relative on a temporary basis. In granting a judgment in favor of Metropolitan, the circuit court reasoned as follows: On March 31, 2016, BGD Law, a law firm owned by [Dusing] leased the 2016 Mercedes for a period of five years or 60,000 miles. That lease also provided a 24-month service agreement. The lease also charged BGD Law fees for license and registration of the vehicle. Dusing asserted that he is entitled to coverage for the loss of the 2016 Mercedes, claiming that that vehicle was a "non-owned" vehicle under the policy. In response Metropolitan takes the position that the 2016 Mercedes could not qualify as a "non-owned" vehicle for several reasons. 1. The 2016 Mercedes was not provided on a temporary basis, but rather was the subject of a 5-year, 60,000 mile lease, with a 24-month service agreement. 2. Metropolitan states that the vehicle was not "commercially rented." Unlike a rental agreement, the 2016 Mercedes was provided to BGD Law and charged license and registration fees which are not standard for "commercially rented" vehicles. Having reviewed the evidence in this case and having considered the Briefs of the parties, this Court agrees with the position taken by Metropolitan that the 2016 Mercedes was not a "non-owned" vehicle which would allow it to be covered by the policy issued in 2015. In sum, there is no coverage for the loss to this vehicle under the Metropolitan policy. It is undisputed that Dusing failed to purchase insurance coverage for the 2016 Mercedes. Therefore, it is not a "covered vehicle" pursuant to the Policy which, to be clear, is Dusing's personal Policy. The Court of Appeal was logically inclined to agree with the circuit court that a vehicle subject to a five-year lease cannot reasonably be considered as "non-owned" for purposes of the Policy. Indeed, it strains credulity to consider the 2016 Mercedes at issue here to be a "commercially rented" vehicle being used on a "temporary basis," merely because it was being leased by Dusing's law firm. Therefore, it was unreasonable to conclude that Dusing had a "reasonable expectation" of coverage. ZALMA OPINION This case is an example of a lawyer attempting to force an insurer to pay for a loss he knew, or reasonably should have known, was not covered by his personal auto insurance. A car leased by his law firm and provided for his use is not a personal auto, leased for five years could not be considered “temporary” under any concept of reason, and should have been insured by the law firm that leased it. Although he had an insurable interest in the Mercedes he failed to advise the insurer that it was leased for his use nor did he pay a premium for the policy. Taking the case up to the Court of Appeal was a waste of his time, the trial court’s time and the time of the Court of Appeal. (c) 2022 Barry Zalma & ClaimSchool, Inc. Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 54 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com. Subscribe and receive videos limited to subscribers of Excellence in Claims Handling at locals.com https://zalmaoninsurance.locals.com/subscribe. Subscribe to Excellence in Claims Handling at https://barryzalma.substack.com/welcome. Write to Mr. Zalma at zalma@zalma.com; http://www.zalma.com; http://zalma.com/blog; daily articles are published at https://zalma.substack.com. Go to the podcast Zalma On Insurance at https://anchor.fm/barry-zalma; Follow Mr. Zalma on Twitter at https://twitter.com/bzalma; Go to Barry Zalma 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/

When Insurer Let's Insured Unilaterally Choose Additional Insureds it has no Standing to Complain A n insurer, by drafting an open-ended additional insured endorsement that allowed its insured, by entering into contracts under which the insurer would be obligated to provide a defense to people unknown to the insurer and which did not require that its insured to obtain the insurer's approval of the contracts or require its insured to disclose the identities of the third parties or require that named insured name those parties as additional insureds. The insurer assumed the responsibility of providing defenses for certain unknown and unnamed third-party beneficiaries. In Westfield Insurance Company v. Walsh/K-Five Jv (I-14-4208); Walsh/K-Five Jv (I-14-4209); Walsh Construction Company Ii, Llc/K-Five Construction Company Jv, a Joint Venture; Walsh Construction Company Ii, Llc; K-Five Construction Corporation; Arch Insurance Company; and Royce Brown, Defendants, Walsh/K-Five JV (I-14-4208), Walsh/K-Five JV (I-14-4209), Walsh Construction Company II, LLC/K-Five Construction Company JV, a Joint Venture, Walsh Construction Company II, LLC, and K-Five Construction Corporation, 2022 IL App (1st) 210802-U, No. 1-21-0802, Court of Appeals of Illinois, First District, Third Division (August 17, 2022) compelled the insurer to live up to its agreements. FACTS Westfield Insurance Company (Westfield) filed a declaratory judgment action seeking a determination that it owed no duty to defend or indemnify defendants in an underlying personal injury lawsuit that occurred at a construction site at which Walsh and K-Five were operating a joint venture. In the underlying lawsuit, Royce Brown (Brown), an employee of VMR Contractors, Inc. (VMR), a subcontractor at the construction site, injured himself carrying rebar. The trial court found Westfield owed a duty to defend each and denied Westfield's motion to avoid its defense duty. Walsh entered into two line-item joint venture agreements with K-Five to bid on two separate contracts from the Illinois State Toll Highway Authority, which involved pavement widening and bridge reconstruction work on the Jane Addams Memorial Tollway. Further, the Joint Venture, Walsh (if K-Five was the named insured on the policy) and K-Five (if Walsh was the named insured on the policy) were required to be named as additional insureds in the commercial general liability insurance policy "for claims arising out of the performance of the named insured Party's Work. The Westfield Policy In light of the VMR's obligations under the subcontracts, it obtained a policy from Westfield that contained commercial general liability insurance with a one-year term. In the general liability declarations, VMR was listed as the named insured. Section II of the Commercial General Liability Coverage Form was titled "Who Is An Insured" provided that: "Any organization you newly acquire or form, other than a partnership, joint venture or limited liability company, and over which you maintain ownership or majority interest, will qualify as a Named Insured if there is no other similar insurance available to that organization" subject to three listed conditions. The Underlying Personal Injury Lawsuit After VMR obtained its commercial general liability insurance policy, it began work on the Jane Addams Memorial Tollway construction project. In September 2015, Brown was working as an ironworker on the construction project for VMR. While Brown was manually carrying rebar from a designated shakeout area, he injured himself. In August 2017, Brown filed a three-count complaint sounding in negligence against Walsh, K-Five and the Joint Venture for the injuries he sustained while carrying the rebar. ANALYSIS Westfield contended that K-Five and the Joint Venture could not be considered additional insureds under VMR's policy with Westfield because there was no contract in writing that required VMR to add either K-Five or the Joint Venture to the policy as additional insureds. Additionally, Westfield contended that, even if K-Five or the Joint Venture could be considered additional insureds, the joint venture exclusion in the policy negated that coverage. Finally, Westfield argued that the joint venture exclusion also applied to Walsh and negated its potential coverage. As such, Westfield posited that it had no duty to defend Walsh, K-Five or the Joint Venture, and the circuit court's various rulings must be reversed. Coverage under the Policy The prescient words the Illinois Court of Appeal pronounced in LaGrange Memorial Hospital v. St. Paul Insurance Co., 317 Ill.App.3d 863, 870 (2000), when discussing the position insurers place themselves in when obligating themselves to defend unknown third parties with which named insureds have written agreements to add as additional insureds: By drafting this language, [the insurer] acknowledged and accepted that its insured would be entering into contracts under which [the insurer] would be obligated to provide a defense ***. [The insurer] did not require that its insured get [the insurer's] approval of the contracts or require its insured to disclose the identities of the third parties or require that [named insured] name those parties as additional insureds. [The insurer] thus assumed the responsibility of providing defenses for certain unknown and unnamed third-party beneficiaries. That's what occurred in this case. Because the plain language of the Contractors Endorsement mandates that the endorsement does not apply to "any person or organization covered as an additional insured on any other endorsement now or hereafter attached," the joint venture exclusion therein did not negate coverage for Walsh, K-Five or the Joint Venture, as additional insureds under the Additional Insured Endorsement. The Court of Appeal affirmed the circuit court's rulings that granted defendant Walsh Construction Company II, LLC's motion for a partial judgment on the pleadings, granted defendants Walsh/K-Five JV (I-14-4208), Walsh/K-Five JV (I-14-4209), Walsh Construction Company II, LLC/K-Five Construction Company JV and K-Five Construction Corporation's motions for partial summary judgment and denied plaintiff Westfield Insurance Company's motions for summary judgment where plaintiff had a duty to defend defendants. ZALMA OPINION Insurers who give away their underwriting pen to others have learned its decision was expensive. In this case the insurer gave the insured the right to make anyone with whom it contracted additional insureds. By so doing Westfield gave away its right to underwrite its obligation to insure and found it was insuring multiple people it had no idea, when it issued the policy, it insured. Cases like this one should cause insurers to reconsider whether it has sufficient premium to cover the risk it is letting its named insured to impose on it by entering into a contract with others. (c) 2022 Barry Zalma & ClaimSchool, Inc. Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 54 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com. Subscribe and receive videos limited to subscribers of Excellence in Claims Handling at locals.com https://zalmaoninsurance.locals.com/subscribe. Subscribe to Excellence in Claims Handling at https://barryzalma.substack.com/welcome. Write to Mr. Zalma at zalma@zalma.com; http://www.zalma.com; http://zalma.com/blog; daily articles are published at https://zalma.substack.com. Go to the podcast Zalma On Insurance at https://anchor.fm/barry-zalma; Follow Mr. Zalma on Twitter at https://twitter.com/bzalma; Go to Barry Zalma 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/

Michigan Allows Fraudster to Receive PIP Benefits but no UM/UIM Benefits Plaintiff appealed the trial court’s order granting summary disposition in favor of defendants Home-Owners Insurance Company (“Home-Owners”), American Country Insurance Company (ACIC), and Hartford Accident and Indemnity Company (“Hartford”), with respect to plaintiff’s claims for uninsured or underinsured motorist benefits and first-party personal protection insurance (PIP) benefits under the no-fault act, MCL 500.3101 et seq. Although defendants disputed their priority to pay PIP benefits, the trial court did not decide the priority issue, but instead dismissed all claims on the basis of antifraud provisions in defendants’ respective policies. In Jonathan Jones v. Home-Owners Insurance Company, American Country Insurance Company, And Hartford Accident & Indemnity Company, and Sharneta Henderson, No. 355118, Court of Appeals of Michigan (August 18, 2022) the Court of Appeal produced a Solomon-like decision. BASIC FACTS This case arises from a motor vehicle accident on October 28, 2017, in which plaintiff’s vehicle was struck by a vehicle driven by defendant Sharneta Henderson in Detroit. Plaintiff alleges that he was operating a 2009 Ford Crown Victoria and was stopped at a red light when Henderson’s vehicle, traveling at a high rate of speed, drove through a red light and struck his vehicle. Plaintiff sued all three insurers for recovery of no-fault PIP benefits and also uninsured or underinsured motorist benefits. All three insurers filed motions for summary disposition, asserting that plaintiff’s claims were barred by antifraud provisions in the respective policies. In support of their allegations of fraud, defendants relied on surveillance evidence from February, June, and July of 2018, which contradicted plaintiff’s statements regarding the scope of his injuries and pain, his physical limitations, and his inability to work. The trial court found that there was no genuine issue of material fact that plaintiff committed fraud by making material misrepresentations in his deposition and held that all three insurers were entitled to summary disposition on the basis of the antifraud provisions in the policies, and accordingly, dismissed all claims against the insurers. SUMMARY DISPOSITION PRIORITY UNDER MCL 500.3114 Initially, the Court of Appeal concluded that the trial court erred by failing to address which insurer had priority to pay PIP benefits under MCL 500.3114. The general rule is that one looks to a person’s own insurer for no-fault benefits unless one of the statutory exceptions applies. An individual may be entitled to PIP benefits mandated by the no-fault act even if the person is not a named insured “under a no-fault policy, and such a person is not subject to the policy’s antifraud provision.” Because the plaintiff’s entitlement to no-fault benefits was governed by statute, the exclusionary provision in the defendant’s no-fault policy did not apply and could not operate to bar the plaintiff’s claims. Accordingly, the Court of Appeal reversed the trial court’s order granting summary disposition and remanded the case for a determination of the priority of the potential insurers, whether plaintiff is entitled to benefits under a policy, and whether the benefits arise by statute or contract. POST-PROCUREMENT FRAUD Although the trial court concluded that summary disposition was appropriate because of the antifraud provisions of the insurance policies at issue, it failed to determine whether plaintiff was considered an insured for purposes of the policies and whether any alleged fraud occurred to induce the policies as opposed to post-procurement fraud and whether statutory or common-law defenses were available in light of the fraud at issue. See Meemic Ins Co v Fortson, 506 Mich. 287, 305; 954 N.W.2d 115 (2020); Williams v Farm Bureau Mut Ins Co of Mich, 335 Mich.App. 574, 578, 580; 967 N.W.2d 869 (2021) (holding that if the alleged fraud did not influence or induce the policy’s procurement, and antifraud provisions are invalid when they purport to apply to misrepresentations or fraud that occurs after the policy has been issued. UNINSURED AND UNDERINSURED MOTORIST BENEFITS Plaintiff’s complaint also included claims for uninsured and underinsured motorist coverage. The insurance policy itself will govern the interpretation of its provisions regarding uninsured motorist coverage benefits, which are not required by statute. In cases in which uninsured motorist benefits are at issue, the policy definitions are controlling. Accordingly, because uninsured and underinsured motorist coverage is not mandated by the no-fault act, there is no prohibition against enforcement of the antifraud provisions in the defendant insurers’ policies as applied to this coverage. The evidence reflects that plaintiff made repeated statements at his December 2018 deposition regarding his pain and physical limitations following the accident, which he claimed affected his mobility and ability to lift items, and his ability to work. These statements were directly contradicted and established to be factually inaccurate by the surveillance evidence, which showed plaintiff moving freely without apparent pain and discomfort, and repeatedly lifting heavy items into a vehicle. Accordingly, the trial court properly concluded that the evidence, specifically plaintiff’s deposition testimony and the surveillance evidence, establishes that there is no genuine issue of material fact regarding whether plaintiff made false and material misrepresentations, knowing the representations to be false. False statements made during discovery do not provide grounds to void the policy. To be clear, once an insurer fails to timely pay a claim and suit is filed, the parties’ duties of disclosure are governed by the rules of civil procedure, not the insurance policy. A plaintiff-insured only commences suit after the defendant-insurer denies the plaintiff’s claim and that the denial cannot possibly be based on an event that has not yet taken place. This does not mean that a defendant cannot rely on evidence of fraud obtained after litigation commences. It simply means that the evidence must relate to fraud that took place before the proceedings began. Plaintiff’s statements during his deposition, which took place after litigation commenced, cannot be used to implicate an antifraud provision in an insurance policys. However, fraudulent statements made before litigation is commenced properly can be considered and can implicate an antifraud provision in an insurance policy. In this case, plaintiff participated in a recorded interview with a Home-Owners representative on February 16, 2018, before this litigation was commenced. Plaintiff made all of the same false statements he made in his later deposition. At the time of his recorded statement, plaintiff lied about the extent of his injuries and his condition that was proved false by the surveillance evidence. Viewing the evidence in a light most favorable to plaintiff, there is no genuine issue of material fact that plaintiff made material misrepresentations regarding his physical limitations, including his ability to conduct his daily activities of living, that were established by the surveillance evidence to be factually incorrect and untruthful. The surveillance evidence was clear, uncontroverted, and undermined plaintiff’s claim that his injuries hindered his ability to care for himself. The evidence was also such that reasonable minds could not disagree that plaintiff made the statements during his recorded interview knowing that they were false, and with the intent that a no-fault insurer would act on them to determine that he was entitled to coverage. Accordingly, the Court of Appeal concluded that trial court did not err by dismissing plaintiff’s claims for uninsured and underinsured motorist benefits on the basis of plaintiff’s fraudulent misrepresentations. In sum, the Court of Appeal affirmed the trial court’s order granting defendants summary disposition with respect to plaintiff’s claim for uninsured or underinsured motorist benefits but reversed the order to the extent that it dismissed plaintiff’s claim for PIP benefits and remand for further proceedings. ZALMA OPINION The Michigan no-fault statute needs amendment to deprive a person of benefits if he or she commits fraud in the presentation of the claim. This case allows the plaintiff to collect no-fault benefits even though his presentation of claim is clearly false and fraudulent. Trial to determine the extent of those benefits – because of the fraud – will be interesting and limited. Of course, since the fraud is so obvious, plaintiff Jones should be arrested, tried and convicted for insurance fraud under the state’s criminal statutes. Michigan Insurance Code Section 500.4503, and Section 500.4511 make it a felony to knowingly lying about, or concealing an important fact in connection with a insurance claim or payment made under an insurance policy. Applies to issuing fake insurance policies and rate-fixing. Also includes conspiring to do any of the above. The court should have referred Jones to the district attorney.

Substantial Compliance with Statute Transfers Title to Vehicle SERIOUS INJURY ALWAYS BRINGS LITIGATION When an accident results in serious injuries the lawyers for the injured parties seek other defendants, no matter how weak the argument may be to bring in additional defendants. In Delores Zepeda v. Central Motors, Inc., No. 2021-SC-0204-DG, Supreme Court of Kentucky (August 18, 2022) the Kentucky Supreme Court was faced with an argument that a car dealer who sold a vehicle to another and was a few days short on filing all of the transfer of title paperwork, should be held to be the owner of the vehicle and, therefore, responsible for the injuries. This appeal was solely concerned with determining the statutory ownership of the BMW between Garcia and Central Motors which controlled whether Zepeda could dip into Central Motors' insurance. FACTS Dolores Zepeda (Zepeda) was grievously wounded in an automobile accident. She filed a claim against Central Motors, Inc. (Central Motors) alleging it was the statutory owner of the 2002 BMW in which she was a passenger at the time of the accident. The trial court granted summary judgment in favor of Central Motors, holding it had substantially complied with KRS 186A.220 when it sold the vehicle to Juan Garcia (Garcia) and was no longer the statutory owner of the vehicle. Zepeda appealed and the Court of Appeals affirmed the lower court's ruling. Central Motors purchased the vehicle from Loan Portfolio Services in Tennessee on March 19, 2014 and brought the vehicle into Kentucky the same day. Central Motors did not file a notice of vehicle acquisition with the Fayette County Clerk within fifteen (15) days per KRS 186A.220(1). Garcia purchased the vehicle from Central Motors on July 24, 2014 and executed a bill of sale, retail installment contract and security agreement for the purchase. As part of the transaction, Garcia also executed a power of attorney, designating Central Motors as his attorney-in-fact so it could deliver the assigned certificate of title and other documents to make the application for registration and certificate of title on Garcia's behalf. Central Motors obtained proof of insurance from Garcia and then transferred physical possession of the vehicle to him on July 24, 2014. On August 11, 2014, Central Motors paid the required fees and submitted an application for a Kentucky certificate of title and registration and delivered the assigned certificate of title from Tennessee to the Fayette County Clerk. Central Motors then filed a title lien statement with the Woodford County Clerk on August 13, 2014. Woodford was the county in which Garcia resided. Juan Garcia was the father of Darley Morales (Morales). Though Morales did not possess a valid driver's license, Garcia let Morales drive the vehicle. On August 14, 2014, Morales was driving the 2002 BMW when he caused it to crash in a single vehicle accident. Morales had a blood alcohol level (BAC) of 0.145. The accident killed Morales and left his passenger, Zepeda, paralyzed. The title was issued in Garcia's name the next day on August 15th and the registration was completed on the 18th, three days later. Zepeda sued the Estate of Morales seeking compensatory and punitive damages; against Garcia for negligent entrustment; against Allstate Property & Casualty Insurance Company (Allstate) for underinsured motorist coverage; and against Central Motors as the purported statutory owner of the vehicle. Central Motors filed a motion for summary judgment. The trial court ruled Central Motors had substantially complied with the statute when it submitted an application for certificate of title along with the previous title. The trial court reasoned Central Motors provided notice under KRS 186A.220(1) to the Fayette County Clerk when it submitted the aforementioned documents. Therefore, the trial court reasoned, under the Kentucky Supreme Court’s decision in Travelers Indem. Co. v. Armstrong, 565 S.W.3d 550 (Ky. 2018), that there was substantial compliance with KRS 186A.220. ANALYSIS In this case Central Motors was the title holder but Garcia had received physical possession of the BMW pursuant to a bona fide sale on July 24, 2014. Despite Kentucky being a certificate of title state for the purpose of determining ownership and for requiring liability insurance coverage, KRS 186.010(7)(c) provides an exception to the general rule. If a licensed motor vehicle dealer delivers physical possession to the buyer and complies with KRS 186A.220 then ownership transfers upon physical delivery of the vehicle. By violating the strict requirements of the provisions (namely, the 15 day requirement) but still accomplishing the goal (notifying the clerk of the acquisition of the vehicle), the intention of the statute is still upheld. Substantial compliance, i.e., late compliance, may still allow the dealer to take advantage of the exception in KRS 186.010(7)(c). The purpose of the KRS 186A.220(1) is to effectuate an efficient registration and titling process. If a dealer complies with these requirements late, it does not vitiate the overarching goal. The statute is directory and substantial compliance is sufficient for those sections. A licensed dealer can cure an untimely compliance with KRS 186A.220, sections 1 through if the dealer has complied before the accident, it can still avail itself of the exception in KRS 186.010(7)(c). KRS 186.010(7) provides: “’Owner’ means a person who holds the legal title of a vehicle or a person who pursuant to a bona fide sale has received physical possession of the vehicle subject to any applicable security interest.” and “A licensed motor vehicle dealer who transfers physical possession of a motor vehicle to a purchaser pursuant to a bona fide sale, and complies with the requirements of KRS 186A.220, shall not be deemed the owner of that motor vehicle solely due to an assignment to his dealership or a certificate of title in the dealership's name. Rather, under these circumstances, ownership shall transfer upon delivery of the vehicle to the purchaser. . . . (emphasis added) Central Motors substantially complied with KRS 186A.220 and transferred physical possession of the vehicle pursuant to a bona fide sale. As such, Central Motors was not the statutory owner of the vehicle on the date of the accident. ZALMA OPINION It is understandable that Zepeda, now a paraplegic, would seek the deep pockets of Central Motors and its insurers. Regardless, the technical argument failed because of the exceptions within the statute and the fact that Central Motors substantially complied with the requirements of the statute, Zepeda's attempt to reach deep pockets failed and she is left with her suit against the driver, his father and the available insurers. She is also faced with a problem of comparative negligence by riding with an intoxicated, unlicensed driver who eventually drove into a tree and died in the effort. (c) 2022 Barry Zalma & ClaimSchool, Inc. Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 54 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com. Subscribe and receive videos limited to subscribers of Excellence in Claims Handling at locals.com https://zalmaoninsurance.locals.com/subscribe. Subscribe to Excellence in Claims Handling at https://barryzalma.substack.com/welcome. Write to Mr. Zalma at zalma@zalma.com; http://www.zalma.com; http://zalma.com/blog; daily articles are published at https://zalma.substack.com. Go to the podcast Zalma On Insurance at https://anchor.fm/barry-zalma; Follow Mr. Zalma on Twitter at https://twitter.com/bzalma; Go to Barry Zalma 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/

Judgment Eliminating Defamation Coverage Defeats Coverage Although the duty to defend is exceedingly broad the obligation of an insurer to defend and insured is not unlimited. In University Of Louisville v. Kentucky School Boards Insurance Trust And Cyril William Helm, No. 2021-CA-1066-MR, Court of Appeals of Kentucky (August 19, 2022) the University of Louisville (the "University") appealed from the summary judgment in favor of Kentucky School Boards Insurance Trust (KSBIT) regarding KSBIT's duty to provide a defense and indemnification in a separate circuit court case pursuant to a policy of insurance. KSBIT is a domestic insurer that was created in 1978 to provide liability coverage to educational entities via a non-profit self-insurance pool of funds. KSBIT issued a general liability insurance policy to the University, which was renewed for several years. The Coverage B section of the policy addresses coverage for personal and advertising liability, and Section I(B)(1)(a) provides in relevant part that "[w]e [KSBIT] will pay those sums that the Member [the University] becomes legally obligated to pay as damages because of 'personal injury' or 'advertising injury' to which this coverage part applies." In the definitional section of the policy, Section V(10) defines "personal injury" as: False arrest, detention or imprisonment; Malicious prosecution; the wrongful eviction from, wrongful entry into, or invasion of the right of a private occupancy of a room, dwelling or premises that a person occupies by or on behalf of its owner, landlord or lessor; oral or written publication of material that slanders or libels a person or organization or disparages a person's or organization's goods, products or services; oral or written publication of material that violates a person's right of privacy; or mental injury, mental anguish, shock, humiliation, defamation, and damage to professional reputation. The underlying matter began with a suit for a declaratory judgment by KSBIT , in January 2021 related to the policy. In this action, KSBIT sought a declaration that it did not have any obligation under the insurance policy to defend or indemnify the University as a result of a Kentucky Whistleblower Act claim filed by Dr. Cyril Helm (Helm v. University of Louisville, Jefferson Circuit Court Case No. 15-CI-01410). FACTS Dr. Helm's dispute with the University began in 2009, after his colleagues had alleged he had committed plagiarism or other misconduct in his research. Dr. Helm went on to file several lawsuits against the University and his colleagues arising from the misconduct allegations and the University's investigation into whether he had engaged in misconduct, including the one noted above. In the lawsuit before the court Dr. Helm alleged that he had suffered a personal injury, and KSBIT provided a defense to the University subject to a reservation of rights. Dr. Helm pled a claim for damages, including substantial losses in earnings, job experience, and benefits; damage to his academic reputation; and emotional and physical stress. He sought compensatory and punitive damages as well as costs and attorney fees. The Jefferson Circuit Court ruled that Dr. Helm could not recover damages for mental anguish/pain and suffering, front pay, or from having to sell his house in a certain market. It also dismissed Dr. Helm's claim for punitive damages. The only remaining claims were for back pay and attorney fees. Because Dr. Helm's claims for back pay and attorney fees did not arise from a personal injury as defined in the policy, KSBIT alleged that there was no longer any factual or legal basis under the policy requiring it to defend or indemnify the University in Dr. Helm's underlying suit. Therefore, KSBIT sought a declaration that it did not have an obligation to further defend or indemnify the University for the claims Dr. Helm asserted in his underlying action. The circuit court entered an order granting summary judgment to KSBIT, rejecting the University's arguments and holding that KSBIT was not required to provide a continuing defense to the University. ANALYSIS In its summary judgment the circuit court rejected the University's argument that the back pay and attorney fees grew out of, flowed from, or had an incidental relationship with Dr. Helm's claimed damages. It agreed with KSBIT that Dr. Helm's remaining alleged damages did not arise from the policy's definition of personal injury. The court therefore held that under the policy's definition of personal injury, KSBIT was not required to continue to provide a defense to the University against Dr. Helm's claims. The proper standard for the analysis of insurance contracts in Kentucky is a subjective one. Terms of insurance contracts that have no technical meaning in law and are to be interpreted according to the usage of the average man and as they would be read and understood by him in the light of the prevailing rule that uncertainties and ambiguities must be resolved in favor of the insured. In Kentucky, as in all jurisdictions, that an insurer has a duty to defend if there is an allegation which might come within the coverage terms of the insurance policy, but this duty ends once the insurer establishes that the liability is in fact not covered by the policy. Once the Jefferson Circuit Court ruled that Dr. Helm was not able to recover damages for mental anguish, pain and suffering, front pay, or having to sell his house in a certain market, he was only able to recover damages for six months of back pay and attorney fees. The court agreed with KSBIT that its duty to provide coverage ended once the Jefferson Circuit Court ruled that Dr. Helm's damages were limited to back pay and attorney fees. Attorney fees are not compensatory damages because any award does not compensate the plaintiff for any wrong done by the defendant. Therefore, the circuit court did not err as a matter of law in concluding that KSBIT was not required to continue to provide coverage based upon the policy's definition of personal injury. Contrary to the allegations of the university the circuit court properly concluded that an insurer has a duty to defend if there is an allegation which might come within the coverage terms of the insurance policy, but this duty ends once the insurer establishes that the liability is in fact not covered by the policy. The circuit court noted that KSBIT had provided a defense in Dr. Helm's action and won, meaning that there was no need to prosecute an appeal on the University's behalf. There was no continuing duty for KSBIT to provide coverage to the University in Dr. Helm's action. ZALMA OPINION This case clearly established that the broad duty to defend is not an unlimited duty. Before an insurer is obligated to defend an insured there must be an action for a tort that the insurer agreed to defend and/or indemnify the insured. KSBIT defended the University successfully and obtained a favorable judgment eliminating all charges of "Personal Injury" leaving only contract damages for back pay. The win, on behalf of the University, eliminated any further obligation KSBIT had to indemnify and therefore any obligation to defend the University. The University did not appreciate the win and tried to get defense for the remaining allegations, for injuries and claims not covered by a liability insurance policy. (c) 2022 Barry Zalma & ClaimSchool, Inc. Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 54 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com. Subscribe and receive videos limited to subscribers of Excellence in Claims Handling at locals.com https://zalmaoninsurance.locals.com/subscribe. Subscribe to Excellence in Claims Handling at https://barryzalma.substack.com/welcome. Write to Mr. Zalma at zalma@zalma.com; http://www.zalma.com; http://zalma.com/blog; daily articles are published at https://zalma.substack.com. Go to the podcast Zalma On Insurance at https://anchor.fm/barry-zalma; Follow Mr. Zalma on Twitter at https://twitter.com/bzalma; Go to Barry Zalma 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/

It's Not Nice to Lie in a Pleading Earnest A. Davis sued a car repair shop, its manager, and his car insurance company alleging they engaged in a ploy to damage his convertible Porsche so that he couldn't afford to repair it and another customer of the repair shop could purchase it. On appeal, he challenges the trial judge's rulings sustaining the defendants' demurrers and dismissing his lawsuit in its entirety. In Earnest A. Davis v. Government Employees Insurance Company et al., E074317, California Court of Appeals, Fourth District, Second Division (August 15, 2022) the trial court gave the plaintiff four chances to plead a cause of action against the defendants although he admitted to accrual and a suit filed after running of the statute of limitations. FACTS Before his claims were dismissed on demurrer, Davis filed four complaints over the course of his litigation. For a short time-to defend against the first round of demurrers-Davis was represented by counsel. For the remainder of the litigation, he represented himself, as he does on appeal. The gravamen of Davis's lawsuit is his claim that defendants and respondents Walter's Auto Sales and Service, Inc. and their service manager Conrad Castillon (collectively, Walter's) intentionally vandalized his 1998 Porsche 993 Series 911 Carrera Cabriolet so they could pressure him into selling it to another customer. Later in the litigation, Davis added as a defendant his car insurance company, Government Employees Insurance Company (GEICO), alleging they conspired with Walter's to deem his car a total loss. Davis claimed that after Walter's installed a new passenger compartment main wiring harness (essentially fixing the issue), they engaged in the following ploy to get him to sell his car to another customer for a salvage price. Walter's then told GEICO the car could not be repaired and GEICO issued a total loss declaration, which resulted in the Department of Motor Vehicles (DMV) giving the car a salvage designation. The First Amended Complaint (FAC) The FAC, filed on July 2, 2018, makes the same basic allegations of misconduct against Walter's but asserts a total of 12 causes of action. Like the original complaint, the FAC did not name GEICO as a defendant or make any allegations of wrongdoing against the insurance company. Rather, Davis alleged only that GEICO had authorized and paid for the repairs, and later, had declared the car a total loss with the DMV in reliance on misinformation from Walter's. The Second Amended Complaint (SAC) The SAC, filed on November 30, 2018, asserted 16 causes of action against Walter's, and is 90 pages long with over 170 pages of attachments. This time, Davis named GEICO as a defendant because, as he explained in his motion for leave to amend, GEICO was the only entity who could restore his car's status with the DMV. Davis repeated the allegation that he knew, based on his experience as a mechanical engineer, Walter's was lying when they told him on November 6, 2014 that parts of the top harness had melted. As for Davis's allegations against GEICO, in one place in the SAC he alleged "GEICO conspired with Walter's to use misinformation to wrongly deem [his car] a total loss," but in multiple other places he simply alleges that GEICO deemed his car a total loss based on the misinformation provided by Walter's. Walter's Cross-Complaint Walter's filed a cross-complaint against Davis seeking $4,320 for unpaid work on the car plus daily storage fees. Walter's demurrer argued, among other things, that Davis's claims were barred by the applicable three-year statute of limitations because his allegations demonstrated he knew of the alleged wrongdoing by at least January 27, 2015 yet didn't file his lawsuit until April 2018-nearly three months past the deadline to sue. GEICO's demurrer argued Davis's claims against them failed as a matter of law and were time-barred. Walter's and GEICO requested oral argument on the tentative ruling, but Davis did not. At the hearing, his then counsel was silent during the discussion of GEICO's motions and, when asked by the judge, said he had nothing to add. The judge adopted his tentative ruling, explaining he was giving Davis "one more opportunity" on the claims against Walter's "to see if [he] can plead around delayed discovery issues." The Third Amended Complaint (TAC) The TAC was eight pages long, asserted just two causes of action against Walter's-trespass to chattels and negligence-and alleged a different theory of wrongdoing than the three previous complaints. Instead, under the heading, "Delayed Discovery," the TAC alleged Davis didn't learn that removing the damaged harness was negligent until over a year and a half later, in July 2016 contradicting his earlier pleadings to avoid the statute of limitations. The judge concluded the pleadings demonstrated the claims against Walter's accrued on January 27, 2015 at the latest, and he sustained the demurrer with prejudice. ANALYSIS Davis Forfeited Any Opposition to GEICO'S Demurrer Davis did not file an opposition to GEICO's demurrer (even after GEICO asked if he planned to do so) nor did he request oral argument after receiving the judge's tentative ruling. And, when directly asked if he had anything to add at the hearing on GEICO's demurrer, Davis's attorney said no, thereby acquiescing in the judge's decision to sustain the demurrer. The forfeiture rule applies with special force when the appealing party received the judge's tentative ruling and raised no objection to it. Because courts must hold self-represented litigants to the same standards as attorneys, it doesn't matter that he is no longer represented by counsel and represents himself on appeal. A doctrine generally requiring or permitting exceptional treatment of parties who represent themselves would lead to a quagmire in the trial courts, and would be unfair to the other parties to litigation. Davis's challenge to GEICO's demurrer would fail even if the court was to consider its merits. This is because all of his claims against GEICO are based on fraud, which requires an intentional misrepresentation by GEICO. To be liable for fraud the defendant must have made a misrepresentation with knowledge of its falsity and the intent to induce another's reliance on the misrepresentation. Davis failed to allege GEICO intentionally misrepresented the condition of his car to the DMV. Instead, he alleged GEICO relied on misrepresentations Walter's made. Thus, because the only intentional misrepresentations alleged were those made by Walter's to GEICO, Davis's claims against the insurance company fail as a matter of law. The Claims Against Walter's Are Time-Barred Unless the discovery rule applies, a claim accrues on the date of injury. The triggering event is not when Davis knew or reasonably should have suspected that he could succeed against Walter's in court-that is, when he suspected Walter's ultimate liability. Rather, his claims accrued when he suspected or reasonably should have suspected that Walter's had done something wrong to him and caused him injury. The statute of limitations for both trespass to chattels and negligence resulting in damage to personal property is three years. And without dispute, the allegations in Davis's first three complaints-which, at the demurrer stage, we assume are true-reveal that he suspected wrongdoing from Walter's as early as November 2014, when they told him the top harness had melted in spots. The allegations in the first three complaints show that Davis knew Walter's had wronged him by January 27, 2015 at the latest. That is the day he alleged he inspected his car and discovered they had "vandalized" it by removing the new wiring harness they had just installed. According to Davis's own allegations, that "act of sabotage" made future repairs much more costly. Davis tried to avoid the import of these allegations when he drafted the TAC by simply deleting them, but a party may not avoid the defects of a prior complaint either by omitting the facts that rendered the complaint defective or by pleading facts inconsistent with the allegations of prior pleadings. In such cases, a trial judge is permitted to treat the prior pleadings as true and disregard the subsequent, contrary allegations. Davis had multiple opportunities to amend his pleadings to explain why his claims were not time-barred. Therefore the judgment was affirmed ZALMA OPINION It is strange to see a plaintiff alleging he was the victim of a fraud to attempt to save a time-barred lawsuit, in his fourth attempt to plead a lawsuit, he fraudulently changed the date of accrual of his claim. The California Court of Appeal refused to fall for his scheme. (c) 2022 Barry Zalma & ClaimSchool, Inc. Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 54 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com. Subscribe and receive videos limited to subscribers of Excellence in Claims Handling at locals.com https://zalmaoninsurance.locals.com/subscribe. Subscribe to Excellence in Claims Handling at https://barryzalma.substack.com/welcome. Write to Mr. Zalma at zalma@zalma.com; http://www.zalma.com; http://zalma.com/blog; daily articles are published at https://zalma.substack.com. Go to the podcast Zalma On Insurance at https://anchor.fm/barry-zalma; Follow Mr. Zalma on Twitter at https://twitter.com/bzalma; Go to Barry Zalma 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/

When Insurer Refuses Defense Fees Incurred by Insured Are Presumed to be Reasonable & Necessary Insurer Should Consider Defense Under a Reservation Rather than Refuse Defense Larry Nassar, who was affiliated with nonprofit USA Gymnastics, Inc. (“USAG”), sexually assaulted hundreds of female athletes. After Nassar’s conduct came to light, USAG faced many lawsuits and multiple investigations. USAG and its insurers, including Liberty Insurance Underwriters, Inc., litigated questions about insurance coverage in an adversary proceeding before a bankruptcy court. In a previous appeal, among other rulings, the Seventh Circuit affirmed the decision that Liberty had a duty to defend USAG.In USA Gymnastics v. Liberty Insurance Underwriters, Inc., No. 21-2914, United States Court of Appeals, Seventh Circuit (August 16, 2022) USAG and Liberty disputed the amount of fees to which USAG was entitled after liability of Liberty to defend was established by the Seventh Circuit.Right to Reimbursement of Attorneys FeesThere were also ancillary disputes over the amount of attorneys’ fees that Liberty owed USAG.The underlying facts are described in detail in USA Gymnastics v. Liberty Ins. Underwriters, Inc., 27 F.4th 499, 508 (7th Cir. 2022). In short, Nassar used his position with USAG to sexually assault hundreds of women and girls over several decades. Because of that abuse, USAG has faced hundreds of lawsuits by former athletes, as well as several investigations by federal and state entities, including Congress, the Indiana Attorney General, and the United States Olympic &Paralympic Committee (“USOPC”).Faced with cross-motions for summary judgment, the bankruptcy court concluded that Liberty’s policy covered the “athlete lawsuits” and various investigations. Liberty filed objections to the bankruptcy court’s findings and conclusions, but the district court overruled those objections. In January 2020, the district court ordered Liberty to “provide a complete defense” to USAG with respect to several matters, including the athlete lawsuits and several investigations. The district court also ordered Liberty to reimburse USAG for its defense costs, but the court did not award damages in any specific amount. Liberty appealed the district court’s order.While the first appeal was pending, the parties continued to dispute and litigate issues concerning payment. Liberty did not agree to USAG’s demand and sought to stay the district court’s defense order. In turn, USAG moved to enforce the order.In addition, USAG offered the expert testimony of attorney Gene Schoon, who had prior experience serving as a national coordinating counsel during his days as a practicing lawyer. He testified that in his opinion, all the fees USAG sought were reasonable and necessary. On the other hand, Liberty presented the expert testimony of attorney Brand Cooper. At that point, Cooper testified that he determined certain fee amounts incurred by USAG-which totaled about $1.43 million-were reasonable and necessary. Yet almost immediately, Cooper contradicted his prior testimony. In answer to the court’s questions, Cooper expanded on the nature of his objections but refused to give concrete figures that were not disputed.It is undisputed that USAG paid nearly 70 percent of the attorneys’ fees for which it now seeks reimbursement. That is compelling evidence of a market test. This element of the Thomson presumption supports, rather than contradicts, the bankruptcy and district courts’ conclusions that the fees USAG claimed are presumed to be reasonable and necessary.Incorrectly Refusing to Defend Eliminates the Insurer’s Right to Control Defense CostsTherefore, the judgment was affirmed. ZALMA OPINION Insurers take the risk of paying more for the defense of an insured when it refuses to defend and is later found to have erred and a court orders the insurer to defend or indemnify the insured. In such situation a presumption exists that an insured, using its own money to pay counsel paid only reasonable and necessary fees. As the Seventh Circuit concluded the insured – in bankruptcy – did not have money available to pay excessive fees and presumed what they paid and what they were unable to pay were reasonable and necessary and Liberty must reimburse USAG for those fees. If Liberty defended under a reservation of rights it could control the fees and if it was found to have no coverage it could get reimbursement from the insured from whatever assets available from the bankruptcy court. Liberty gambled it was right and lost and must pay the fees charged to USAG.(c) 2022 Barry Zalma & ClaimSchool, Inc. Barry Zalma, Esq., CFE, is available at http://www.zalma.com and zalma@zalma.com. Subscribe and receive videos limited to subscribers of Excellence in Claims Handling at locals.com https://zalmaoninsurance.locals.com/subscribe. Write to Mr. Zalma at zalma@zalma.com; Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library/

About WordPress ClaimSchool, Inc. Customize 00 Comments in moderation New Edit Post ExactMetrics Search Howdy, barryzalma Log Out ClaimSchool, Inc. Creating Insurance Claims Professionals by Excellence in Claims Handling Skip to content Training to Create Insurance Claims Professionals ← Washington State Rewrites CGL Posted on August 18, 2022 by barryzalma Assuming that Coverage Exists Does not Make a Contract See the full video at and at https://youtu.be/IaoTSNF9VxI Barry A. Lindsten appealed a circuit court order dismissing his action against Astronautics Corporation of America (Astronautics) and Robertson Ryan &Associates, Inc. and Michael R. Schulte (Robertson Ryan). In Barry A. Lindsten, Sarah M. Lindsten v. Astronautics Corporation of America, Mayo Medical Plan, Trumbull Insurance Company, Hartford Casualty Insurance Company and Hartford Fire Insurance Company, Defendants, Robertson Ryan &Associates, Inc. and Michael R. Schulte, ABC Insurance Company, No. 2021AP115, Court of Appeals of Wisconsin, District I (August 16, 2022) the Court of Appeals resolved the issues raised by Lindsten. BACKGROUND On August 13, 2016, in Milwaukee County, a motor vehicle struck a rental vehicle driven by Lindsten. At the time of the accident, Lindsten was in Wisconsin to perform work for his employer, Astronautics, who provided and paid for the rental vehicle. Lindsten alleged that Astronautics and its insurance agent/broker, Robertson Ryan, had failed to provide underinsured motorist (UIM) coverage. Astronautics moved to lift the stay for the limited purpose of addressing whether it was a proper party in the case. The circuit court granted Astronautics’ motion to lift the stay and allowed the parties to conduct discovery on the following limited issues: (1) whether Lindsten was acting within the scope of his employment for Astronautics when the accident at issue took place; and (2) whether Astronautics entered into a contract with Lindsten to specifically provide UIM coverage. Lindsten filed an amended complaint. Lindsten raised two causes of action against Astronautics: (1) breach of an oral contract; and (2) reformation. According to Lindsten, on or prior to the date of the accident, he was informed by Astronautics’ travel administrator that Astronautics “would provide full insurance coverage” and “would take care of all his insurance needs on rental cars.” Based on prior travel experience with previous employers, Lindsten assumed this included UIM coverage. Lindsten further alleged that the travel administrator informed him that he should sign an insurance waiver to specifically opt out of the insurance coverage offered by the rental agency in favor of the coverage provided by Astronautics. In regards to Robertson Ryan, Lindsten also raised two causes of action: (1) breach of contract; and (2) negligence. Lindsten alleged that Astronautics had specifically requested that Robertson Ryan provide UIM coverage, and that Robertson Ryan had failed to procure a policy that would provide UIM coverage. Further, Lindsten alleged that if Robertson Ryan had procured the UIM coverage, Lindsten would have been a third-party beneficiary of any such insurance coverage. Both Astronautics and Robertson Ryan filed a motion to dismiss. Astronautics contended that the allegation that Astronautics agreed to take care of all of Lindsten’s insurance needs was not specific enough to cover an offer to provide UIM coverage, thus, no contract was created. Further, Astronautics contended that only written contracts could be reformed. The circuit court granted the motions to dismiss. The court explained that a “specific offer” is required to create an insurance contract, and that it is not enough to simply allege that there was an offer for “insurance,” “full coverage,” or “insurance needs.” Rather, the pleadings needed to specifically refer to UIM coverage. DISCUSSION A motion to dismiss for failure to state a claim tests the legal sufficiency of the complaint. To survive a motion to dismiss, a complaint must contain a short and plain statement of the claim, identifying the transaction or occurrence or series of transactions or occurrences out of which the claim arises and showing that the pleader is entitled to relief. In other words, a complaint must plead facts, which if true, would entitle the plaintiff to relief. Whether a complaint states a claim upon which relief may be granted is a question of law that we review de novo, benefitting from the circuit court’s decision. The court will accept as true the factual allegations in the complaint but will not accept any legal conclusions. Factual allegations must be more than labels and conclusions or a formulaic recitation of the elements of a cause of action. On appeal, Lindsten asserts that the circuit court erred in granting the motions to dismiss. When certain conditions exist, a statute provides the exclusive remedy for recovery for an employee against an employer. Lindsten’s brief-in-chief fails to address why this doctrine does not apply. We generally do not address undeveloped arguments, and we decline to do so here. The trial court’s decision was affirmed. ZALMA OPINION A person cannot create a contract without being able to prove that there was an offer, acceptance of the offer, and payment of consideration. Lindsten claimed that there was an oral contract to provide him all insurance he needed. Even if there was an offer and acceptance of that offer it was too vague to make sense or to be enforceable. Insurance is a contract between the insurer and the insured. Lindsten was neither an insurer nor was he an insured. He was the employee of the insured. (c) 2022 Barry Zalma & ClaimSchool, Inc. Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 54 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com. Subscribe and receive videos limited to subscribers of Excellence in Claims Handling at locals.com https://zalmaoninsurance.locals.com/subscribe. Subscribe to Excellence in Claims Handling at https://barryzalma.substack.com/welcome. Write to Mr. Zalma at zalma@zalma.com; http://www.zalma.com; http://zalma.com/blog; daily articles are published at https://zalma.substack.com. Go to the podcast Zalma On Insurance at https://anchor.fm/barry-zalma; Follow Mr. Zalma on Twitter at https://twitter.com/bzalma; Go to Barry Zalma 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/

Experts Prove All Claimed Damages are Wear and Tear It is not proper to try to shoe-horn a distant explosion into a claim for property damage to an old, worn out house, whose damages had no relationship to the explosion. In fact, making the claim for pre-exisiting damages is fraudulent. In John Hall v. State Farm Lloyds, Civil Action No. H-21-1769, United States District Court, S.D. Texas, Houston Division (July 28, 2022) the USDC in Texas resolved the dispute after considering all of the evidence presented by the parties. BACKGROUND Hall alleges that his home was damaged by an explosion that occurred 1.8 miles away from his house. State Farm moved for summary judgment, submitting reports from two engineers who separately inspected the property and concluded that the damage they observed was not caused by the explosion, but instead by “normal wear and tear, minor material and installation deficiencies, a lack of maintenance, as well as expansion and contraction of the building materials due to naturally occurring variations in temperature and humidity.” Hall has a homeowner's insurance policy with State Farm. The policy “insure[s] for accidental direct physical loss to the property,” but it does not cover losses caused by natural wear and tear, deterioration, or “settling, cracking, shrinking, bulging, or expansion of . . . foundation, walls, floors, roofs, or ceilings.” On January 24, 2020, a propylene-tank leak caused an explosion at Watson Grinding and Manufacturing at 4525 Gessner Road, in Houston, Texas. Hall's home-which was built in 1960 and which Hall purchased in 1983-is 1.8 miles from the explosion site. Hall did not hear or feel anything from the explosion, which occurred when he was asleep. He heard about the explosion later that day on the news. After learning of the explosion, Hall inspected the home “but . . . did not see any damage at that time.” Hall began to suspect that he “did, in fact, sustain damage to [his] home from that explosion” only when the ceiling in his garage fell down six or seven months later, in July or August 2020. After Hall removed fallen sheetrock from the garage floor, he inspected the ceiling and noticed that “the joists . . . were bowed.” Hall saw no other damage on the inside or outside of his home. Hall retained counsel and submitted a claim in September 2020 under the policy. In April 2021, Hall filed this lawsuit against State Farm, even though it had not yet resolved Hall's claim. The delay was largely due to difficulties in getting the property inspection done. The complaint included seemingly irrelevant and false allegations, including that State Farm acted in bad faith “in an action for property damage due to plumbing leaks” and that “the insurer was found to have hired an investigating firm biased against finding liability.” Hall's claim was not for “plumbing leaks,” and State Farm had not denied Hall's claim at that point. State Farm had inspected Hall's property only a few days before Hall filed his lawsuit. One reason for the delay was that the engineer State Farm hired to inspect Hall's property “asked to be removed” from the assignment because of “concerns in regards to communication between [Hall's] attorney rep and the engineer . . . and directives [from Hall's attorney] on how the inspection was going to be completed.” That engineer later “submit[ted] an invoice for the amount of time” he spent unsuccessfully “attempt[ing] to coordinate the visits” to Hall's property. In short, Hall's counsel appears to have been a significant reason for State Farm's delay in adjusting the claim. State Farm did retain a second engineer-Dan Rich from Rich Engineering-who was able to inspect the property in March 2021, but not without difficulty. Hall's counsel refused to allow Rich to speak with Hall “regarding the history of the residence or the damage that was being attributed to the WGM explosion.” At the time of the inspection, “Rich Engineering was not informed of what damage Mr. Hall was specifically attributing to the explosion.” After the inspection, Rich Engineering emailed Hall's counsel a list of questions about the property. Neither Hall nor his counsel responded. Based on the inspection, Rich Engineering concluded that “[t]he residence was not damaged by the explosion.” The report states that: the “foundation was not damaged by the explosion”; cracks in the drywall “were consistent with normal wear and tear, minor material and installation deficiencies, a lack of maintenance, as well as expansion and contraction of the building materials due to naturally occurring variation in temperature and humidity”; the roof was not damaged; cracks in the attic framing “were aged . . . indicat[ing] that the damage predated the explosion”; the “brick veneer cracks had an aged appearance which indicated that they predated the explosion”; and “Rich Engineering did not observe any broken window panes during its site visit.” As a result of Rich Engineering's report, State Farm informed Hall's counsel in May 2021 that it was denying Hall's claim. The denial letter stated that State Farm's “investigation revealed the residence was not damaged by the explosion.” State Farm also hired a structural forensic investigator to inspect the property, BSC Forensic Services, LLC, “to document conditions consistent with the effects of an explosion that occurred on January 24, 2020, at the Watson Grinding Facility, if any.” The BSC report noted that “BSC's inspection revealed no conditions at the subject property that could be attributed to energy waves associated with the reported explosion,” and noted that “the surrounding properties of similar construction also exhibited no such evidence.” The report concluded that the “collapsed ceiling in the garage . . . was attributable to long-term sagged condition of the ceiling joists associated with improper lumber (large knots) and excessive loading from roof beam supports in the attic space above,” and that this condition was not “caused or exacerbated by the reported explosion event.” "Experts" Must See the Damage and Have Qualifications to Testify Hall responded with a report from an engineer who did not visit the property, did not review State Farm's experts' reports, and did not state any basis for opining that the home “seemed” to be damaged by the explosion. Hall also submitted a report from a meteorologist whose speculations as to the root cause of the alleged damage are both beyond his expertise and unhelpful. The Motion to Exclude Expert Testimony Rule 702 charges trial courts to act as “gate-keepers,” making a preliminary assessment of whether the reasoning or methodology underlying the testimony is scientifically valid and of whether that reasoning or methodology properly can be applied to the facts in issue. Expert testimony must be both “relevant and reliable” to be admissible. Greg Degeyter's Report Greg Degeyter is a lawyer who has also worked as a volunteer meteorologist and an adjunct professor in Lamar University's Department of Earth and Space Science. Degeyter, as a meteorologist, is qualified to testify as to weather events at Hall's property. Degeyter is perhaps qualified to testify as to whether certain weather events are likely to cause property damage. Degeyter is unqualified to testify as to the extent of the effects of a distant explosion and whether the damage found in Hall's home was at all related to that explosion. Shiran Perera's Report Shiran Perera is a structural engineer who was designated to opine on whether the blast “caused damage[] to the insured property.” Perera speculated that there was some damage that “seemed” to be related to or could “possibly” be consistent with vibration-related damages. It was excluded because his testimony was unreliable. The Motion for Summary Judgment The dispute is whether the damage to Hall's home was caused by an explosion months earlier and 1.8 miles away. State Farm presented ample evidence that “[t]he residence was not damaged by the explosion.” Hall's evidence-construed generously- supports only the conclusions that Hall's home had several structural issues (as demonstrated by the photographs), that an explosion 1.8 miles away occurred in January 2020, and six months after the explosion, parts of the garage ceiling fell, and some cracks were found. Hall presented no evidence that the explosion did, in fact, damage his home. As a matter of law, State Farm did not breach the policy by denying Hall's claim for coverage. The breach of contract claim was, therefore, dismissed. Hall did not point to or present admissible evidence showing that State Farm violated the Texas Insurance Code, engaged in deceptive trade practices, breached a duty of good faith and fair dealing, conspired to commit illegal acts, or committed fraud. These claims were also dismissed. ZALMA OPINION The decision was obvious. State Farm presented evidence and Hall presented speculation while working hard to set up a bad faith case against State Farm. By dismissing the suit the court did what it was required to do. It should, however, in my opinion have also reported Hall to the US Attorney for attempting to defraud State Farm. (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 athttp://www.zalma.comandzalma@zalma.com. Subscribe and receive videos limited to subscribers of Excellence in Claims Handling at locals.comhttps://zalmaoninsurance.locals.com/subscribe. Subscribe to Excellence in Claims Handling athttps://barryzalma.substack.com/welcome. Write to Mr. Zalma atzalma@zalma.com;http://www.zalma.com;http://zalma.com/blog; daily articles are published athttps://zalma.substack.com.Go to the podcast Zalma On Insurance athttps://anchor.fm/barry-zalma; Follow Mr. Zalma on Twitter athttps://twitter.com/bzalma;Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921;Go to Barry Zalma on YouTube-https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg;Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library/

ZIFL Volume 26, Issue 16 The Danger Of Litigation Financing How the UK Deals with the Scheme Timothy Schools, 61, a corrupt non-litigating lawyer called a “solicitor” in the U.K. who lived a life of luxury on an estate in Cumbria as he fleeced investors out of more than £25m is facing jail. Southwark Crown Court heard how Schools, ra n a scheme financing loans to law firms in “no win no fee” cases between December 2008 and October 2012. The jury reached a verdict on the case only after 28 hours' deliberation. Schools will be sentenced at Southwark Crown Court on Thursday 18th August and remains in custody until that date. Judge Beddoe was quoted as saying to Schools: “I simply don’t trust you to turn up. I refuse bail and you will remain in custody until Thursday.” California Claims Regulations Insurers licensed or operating in California must file their SIU annual reports by Wednesday, Sept. 28, Insurance Commissioner Ricardo Lara reminded insurers recently. Failing to file by the 11:59 pm deadline may lead to fines or other regulatory actions. Information about the annual report requirement is available on the CDI website. Insurers may access an electronic portal to file reports. Insurers licensed or operating in California must ascertain that their entire claims staff has read, understood or be trained about the California Fair Claims Settlement Practices Regulations by September 1 of Each Year and be ready to swear under oath that the Regulation has been complied with by the insurer. “California Fair Claims Settlement Practices Regulations 2022” which is now available as a Kindle Book and available as a Paper Back. Insurance Fraud is Growing Logarmithically “Soft Fraud” Insurance Soft fraud, of course, is a misnomer. Fraud is fraud – a misrepresentation or concealment of material fact, made to deceive an insurer, that actually deceives the insurer to its detriment. Those who use the term “soft fraud” attribute it to fraud of opportunity – like adding to a legitimate claim to recover deductibles or premiums paid over the years – while “hard fraud” is fraud that is pre-meditated. In the U.S., fraud attempts have risen about 22%, an amount much lower than the global average but still on plus side. Another Florida Insurer Goes Bust Weston Property & Casualty Insurance Co. is insolvent and should be placed into receivership, making it the fifth Florida property insurer this year to be dissolved, according to state regulators. The Florida Office of Insurance Regulation (OIR) on August 2, 2022 filed notice with the Department of Financial Services that the 10-year-old Weston, with about 22,000 policies in the state, “is insolvent or about to become insolvent,” and DFS should initiate delinquency proceedings. Health Insurance Fraud Convictions For example: Inform Diagnostics Agrees to Pay $16 Million to Resolve False Claims Act Allegations of Medically Unnecessary Tests Inform Diagnostics, Inc., (Inform) formerly known as Miraca Life Sciences, Inc. (Inform), has agreed to pay $16 million to resolve allegations that it submitted false claims for payment to Medicare and other federal health care programs. Inform is a clinical laboratory headquartered in Irving, Texas, that provides anatomic pathology services to physician practices throughout the United States. On April 27, 2022, Fulgent Genetics purchased Inform, and the company is now a wholly owned subsidiary of Fulgent Genetics. Other Insurance Fraud Convictions For example: Wellman Dynamics, a Creston company that manufactures large metal castings used by military contractors including Bell Helicopter, Sikorsky Aircraft and Boeing Co. will pay $500,000 in restitution to the U.S. government to settle allegations that the southwest Iowa company that makes metal castings used by military contractors in helicopters and other equipment has reached a settlement in a lawsuit alleging the company failed to test the castings and falsely certified test results over seven years. The Fifth Amendment & The Examination Under Oath In Fremont Indemnity Co. v. Superior Court (1982) 137 Cal.App.3d 554, 559, 187 Cal.Rptr. 137 the Court of Appeal concluded that the privilege against self-incrimination as to factual issues, especially application of arson exclusion, waived by filing suit over rights under fire insurance policy. The reasoning of cases such as these is that "‘[t]he gravamen of [the] lawsuit is so inconsistent with the continued assertion of [a] privilege as to compel the conclusion that the privilege has in fact been waived.’" While the Fifth Amendment privilege of a criminal defendant is absolute, a party or witness in a civil proceeding "may be required either to waive the privilege or accept the civil consequences of silence if he or she does exercise it. [Citations.]" There is a broad range of civil sanctions that may be imposed on a litigant who asserts his or her Fifth Amendment right, but the severity of such sanctions generally depends on whether the party invoking the privilege is the plaintiff or the defendant. Where the plaintiff in a civil action claims the privilege and refuses to testify, the court may dismiss the action on the basis that "`[o]ne may not invoke the judicial process seeking affirmative relief and at the same time use the privileges granted by that process to avoid development of proof having a bearing upon his rights to such relief.' [Citation.]" [Gunderson v. Wall, B204268 (Cal. App. 11/17/2009) (Cal. App. 2009)] Health Care Fraud Some Common Types of Health Care Fraud Fraud Committed by Medical Providers Double billing: Submitting multiple claims for the same service Phantom billing: Billing for a service visit or supplies the patient never received Unbundling: Submitting multiple bills for the same service Upcoding: Billing for a more expensive service than the patient actually received Reports of Convictions from the Coalition Against Insurance Fraud Fraud Convictions In Detail Barry Zalma, Esq., CFE Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 54 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com. Over the last 54 years Barry Zalma has dedicated his life to insurance, insurance claims and the need to defeat insurance fraud. He has created the following library of books and other materials to make it possible for insurers and their claims staff to become insurance claims professionals. Barry Zalma, Inc., 4441 Sepulveda Boulevard, CULVER CITY CA 90230-4847, 310-390-4455; Subscribe to Zalma on Insurance at locals.com https://zalmaoninsurance.local.com/subscribe. Subscribe to Excellence in Claims Handling at https://barryzalma.substack.com/welcome. Write to Mr. Zalma at zalma@zalma.com; http://www.zalma.com; http://zalma.com/blog; I publish daily articles at https://zalma.substack.com, Go to the podcast Zalma On Insurance at https://anchor.fm/barry-zalma; Follow Mr. Zalma on Twitter at https://twitter.com/bzalma; Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921

Magistrate Contends Fortuity Defense can be Waived Homeland Insurance Company of New York (“Homeland”) sued Clinical Pathology Laboratories, Inc. (“CPL”) and CPL's parent company, Sonic Healthcare USA, Inc. (“Sonic USA”) (collectively, “Defendants”) for a declaration that it has no duty to reimburse Defendants for defending a number of medical negligence lawsuits filed against them in Ireland in Homeland Insurance Company Of New York v. Clinical Pathology Laboratories, Inc. And Sonic Healthcare USA, CIVIL No. 1-20-CV-783-RP, United States District Court, W.D. Texas, Austin Division (July 19, 2022) BACKGROUND CPL is an Austin, Texas-based provider of medical laboratory services. CPL and Sonic USA are subsidiaries of Sonic Healthcare Limited (“Sonic”), a global healthcare company headquartered in Sydney, Australia. Sonic also owns Sonic Healthcare (Ireland) Limited (“Sonic Ireland”) and MedLab Pathology (“MedLab”), both of which are Irish providers of medical laboratory services. Coverage Dispute On June 30, 2013, Homeland issued a Medical Facilities and Providers Professional Liability, General Liability and Employee Benefit Liability Policy to Sonic USA and CPL for the policy period June 30, 2013 through June 30, 2014. (the “2014 Policy”). The 2014 Policy covered certain claims for wrongful acts and personal injury. The parties renewed the 2014 Policy for the 2015-2016 period. Notably, the 2014 and 2015 Policies covered only claims made in the United States, its territories, or Canada. In August 2015, the family of a woman (“Ms. O I”) who died after developing cervical cancer filed a negligence lawsuit in Ireland against CPL, Sonic USA, and other entities, based on alleged misread pap smear slides. After CPL was served with the lawsuit, it filed an insurance claim with Homeland. On July 7, 2016, Homeland denied the claim because the 2014 Policy did not cover lawsuits filed in Ireland. Closing the Gap in Coverage Once Defendants became aware of their gap in coverage, they “sought to secure worldwide coverage from Homeland starting with the 2016-17 policy period so that if similar claims arose in the future, they would be covered.” Homeland agreed to provide such coverage. On August 30, 2016, the parties executed a Worldwide Territory Endorsement (“WTE”) (Endorsement No. 12, Policy No. MFL-004062-0616) to the 2016 Policy, which extended coverage to claims filed against Defendants “outside the United States of America,” effective June 30, 2016. Homeland alleges that it agreed to the expanded coverage only after requiring Defendants to agree to certain “warranties” in a letter dated July 27, 2016, written by Stephen Shumpert, then CPL's President and Director and Sonic USA's Chief Executive Director and Director who promised there were no pending claims. Homeland issued the same WTE to Defendants' 2017 Policy, which was effective June 30, 2017 through June 30, 2018. In August 2018, the family of “Ms. S” filed a negligence lawsuit in Ireland against MedLab based on an alleged misread pap smear slide. Sonic Ireland and CPL were added as defendants in May 2019. CPL settled the case in October 2019. MedLab and Sonic Ireland did not contribute to the settlement. On July 10, 2020, Homeland denied CPL's claim on the grounds that: (1) the 2016 and 2017 Policies' prior knowledge and prior notice exclusions preclude coverage because MedLab had provided notice of the Ms. S claim to MedLab's insurer, Vero Insurance Company, in 2016; and (2) the 2016 Letter was inaccurate and contained misrepresentations. Litigation On July 24, 2020, Homeland sued CPL, Sonic USA, Sonic Ireland, Sonic Limited, and MedLab, seeking a declaratory judgment that “there is no coverage for the Ms. S Claim under the Primary Policy or the Excess Policy” based on the prior knowledge and prior notice exclusions, and because the 2016 Letter was inaccurate. ANALYSIS Because the purpose of insurance is to protect insureds against unknown, or fortuitous, risks, fortuity is an inherent requirement of all risk insurance policies. The fortuity doctrine relieves insurers from covering certain behaviors that the insured undertook prior to purchasing the policy. Under the doctrine, an insured cannot obtain coverage for something that has already begun and which is known (or should have been known) to have begun. The fortuity doctrine precludes coverage for known losses or losses in progress. A “known loss” is one that the insured knew had occurred before the insured entered into the contract for insurance. A loss in progress is an ongoing progressive loss that the insured is, or should be, aware of at the time the policy is purchased. The fortuity doctrine does not require an insured to have specific, actual knowledge of the loss. Instead, the doctrine precludes coverage when the insured is or should be aware of an ongoing progressive or known loss at the time the policy is purchased. In addition, it has been recognized that the known loss doctrine does not apply if the insurer also knew of the circumstances on which it bases the defense. The insurer bears the burden of establishing that the fortuity doctrine bars coverage. The Fortuity Doctrine Is an Affirmative Defense In recent years, the fortuity doctrine's known loss and loss-in-progress rules have become potent affirmative defenses in coverage litigation that carriers have turned to with increasing frequency. The doctrine has its roots in the prevention of fraud; because insurance policies are designed to insure against fortuities, fraud occurs when a policy is misused to insure a certainty. Fraud is an affirmative defense under Texas law. For these reasons, the Court concluded that the fortuity doctrine is an affirmative defense under Texas law. Homeland Waived the Defense Based on the specific facts of this case, the Court finds that Homeland's delay in raising the fortuity defense constitutes unfair surprise. Homeland did not request and was not granted leave to assert the fortuity doctrine defense. Homeland nevertheless waived it because it did not assert the fortuity doctrine until its Response to Defendants' Motion for Summary Judgment. ZALMA OPINION The fortuity issue is only one of many issues brought to the court and resolved by the recommendations of the Magistrate Judge. The District Judge may accept or reject the recommendations of the Magistrate Judge's lengthy opinion. Since there is a need for fortuity as the essence of insurance and as a recognized unwritten exclusion in every policy it appears the Magistrate Judge erred when he concluded that asserting the defense late is an "unfair surprise" on the defendant insureds since the insureds should have known that fortuity is always an unwritten exclusion and could not, therefore, be surprised, fairly or unfairly. (c) 2022 Barry Zalma & ClaimSchool, Inc. Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 54 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com. Subscribe and receive videos limited to subscribers of Excellence in Claims Handling at locals.com https://zalmaoninsurance.locals.com/subscribe. Subscribe to Excellence in Claims Handling at https://barryzalma.substack.com/welcome. Write to Mr. Zalma at zalma@zalma.com; http://www.zalma.com; http://zalma.com/blog; daily articles are published at https://zalma.substack.com. Go to the podcast Zalma On Insurance at https://anchor.fm/barry-zalma; Follow Mr. Zalma on Twitter at https://twitter.com/bzalma; Go to Barry Zalma 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/