Zalma on Insurance Barry Zalma

Suspicion of Fraud Cannot Support Qui Tam Action

Post 4770

Richard Campfield, suing for the State of California, appealed the trial court sustained the demurrer of defendants Safelite Group, Inc. and its subsidiaries, Safelite Solutions LLC and Safelite Fulfillment, Inc. (collectively, Safelite) without leave to amend. Campfield contends he adequately alleged a cause of action under the Insurance Fraud Prevention Act (Ins. Code, § 1871 et seq.) (IFPA) within the statute of limitations.

In State Of California, ex rel. Richard Campfield v. Safelite Group, Inc., et al., A168101, California Court of Appeals, First District, Fourth Division (March 29, 2024) explained the requirements to plead a Qui Tam action under the IFPA.

Campfield owns a windshield repair company that licenses and sells products for repairing vehicle windshield cracks. Safelite is the nation's largest retailer of vehicle glass repair and replacement services. Safelite also serves as the third party administrator for over 175 insurance and fleet companies, including 23 of the top 30 insurers in California and the country, for processing and adjusting policyholders' vehicle glass damage claims, and it has direct electronic access to over 20 insurance company databases.

In 2015, Campfield sued Safelite in federal district court in Ohio, alleging Safelite's continued reliance on its six-inch rule violated the Lanham Act's (15 U.S.C. § 1051 et seq.) Safelite admitted in responses to interrogatories in the Ohio action that it has never conducted studies on the safety or viability of repair of cracks longer than six inches.

Campfield filed under seal the complaint in the present action against Safelite, alleging a single qui tam cause of action for violation of the Insurance Frauds Prevention Act (IFPA). The Insurance Commissioner and the San Francisco County District Attorney declined to intervene, so in September 2022 the trial court unsealed the complaint.

Safelite demurred, arguing, among other things, that the complaint failed to allege facts constituting a cause of action under the IFPA. Campfield failed to plead his claim with sufficient particularity, and the statute of limitations barred the complaint. After briefing and a hearing, the trial court sustained the demurrer without leave to amend based on the statute of limitations and noted that Safelite had raised "substantial arguments" that the complaint had not stated a cognizable claim and that the action was barred by the IFPA's public disclosure bar. The trial court then dismissed the action.

The IFPA was enacted to prevent automobile and workers' compensation insurance fraud in order to, among other things, significantly reduce the incidence of severity and automobile insurance claim payments and therefore produce a commensurate reduction in automobile insurance premiums.

The sole cause of action in the complaint is based on Insurance Code section 1871.7, subdivision (b), which allows for the imposition of civil penalties and other remedies against anyone who violates Insurance Code section 1871.7 or Penal Code sections 549, 550, or 551. Campfield alleges Safelite violated Penal Code section 550, subdivision (b)(1) and (2).

As in any action sounding in fraud, an IFPA action must be pleaded with particularity.

To effectively state his IFPA cause of action, Campfield must allege facts showing that Safelite presented, or caused to be presented, a false statement as part of, or in support of or opposition to, a claim for payment or other benefit pursuant to an insurance policy or prepared or made a false statement intended to be presented to any insurer or any insurance claimant in connection with, or in support of or opposition to, any claim or payment or other benefit pursuant to an insurance policy.




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"Property Damage" Must Be Actual Not Potential

Post 4771

Breach of Construction Contract Not an Insured Peril

After the plaintiff's motion for summary judgment was rejected and the defendant insurer's motion for summary judgment was granted the plaintiff appealed. In Westchester Modular Homes Of Fairfield County, Inc. v. Arbella Protection Insurance Company, No. AC 45433, Court of Appeals of Connecticut (April 2, 2024) and the Court of Appeals resolved the dispute.

On or about April 27, 2016, the plaintiff entered into a contract with Diana Lada L'Henaff and Jean Jacques L'Henaff for the construction of a new modular home on property located in New Canaan (property). During construction, disputes arose between the L'Henaffs and the plaintiff. Ultimately, the L'Henaffs terminated their contract with the plaintiff on December 14, 2016. The plaintiff filed a mechanic's lien on the property on or about February 3, 2017, and commenced an action to foreclose on the lien on or about April 7, 2017 (underlying litigation).

The L'Henaffs filed a counterclaim that alleged that they "desired to build a modern home and had very carefully and specifically specified the type of insulation, materials, and finishes that they required the builder that won the job to satisfy." The L'Henaffs alleged that work on the project progressed slowly and with constant problems. The L'Henaffs alleged that the plaintiff had breached the construction contract.

The plaintiff, as a named insured under a commercial general liability policy issued by the defendant (policy), filed a claim for coverage with the defendant which was refused. The defendant disclaimed coverage on the basis that the first revised counterclaim filed in the underlying litigation did not allege "property damage" caused by an "occurrence" and, therefore, it did not trigger coverage under the policy.

The trial court determined that the pleadings in the underlying litigation did not allege property damage. As to the extrinsic documents submitted to the defendant by the plaintiff, the court determined that such evidence established only the existence of possible defective work that could lead to future property damage if not remedied but that it did not demonstrate the existence of current property damage.

Because there are no factual issues in dispute in the present case, the court was only faced with the legal question whether the defendant had a duty to defend the plaintiff. Specifically, the defendant contended that the extrinsic documents suggested, "at most, that the construction deficiencies could potentially result in water damage to nondefective areas of the property if not fixed." (Emphasis in original)

The Plaintiffs alleged construction defects and did not allege damage that the defects caused to other, nondefective property. Since the plaintiffs expert testified that he had identified defective work that, if not remedied, could lead to property damage in the future but identified no damage, Plaintiffs failed to allege facts bringing the underlying litigation seeking property damage that would have required a defense.

The Court of Appeals made clear that repairs to structural deficiencies, made for the purpose of preventing physical injury to tangible property before the alleged deficiency has caused property damage are not within the insuring agreement's definition of property damage.

Because there was no indication of water damage at all. At most, the construction deficiencies could potentially result in water damage to nondefective areas of the property if not fixed. Damage to nondefective property in the form of rot or mold caused by water intrusion would be property damage within the terms of the policy language. However, the plaintiff did not present any evidence of actual damage or case law holding that the presence of water, in the absence of actual damage, amounts to covered physical damage.

The Court of Appeals concluded that the notification of the mere p

Lawyers Fraudulent Billing is not Pre-Litigation Protected Petitioning Activity

Post 4772



Strategic Lawsuits Against Public Participation (SLAPP suits) are meritless lawsuits designed to harass parties for engaging in protected activities (the right of petition or free speech). A party can move to dismiss a SLAPP suit by filing an anti-SLAPP motion. The movant must show the purported SLAPP suit arises from its protected activities; if shown, the respondent can defeat the motion by showing its lawsuit has merit.

In OC Media Tower, L.P. et al. v. Louis Galuppo et al., G062372, California Court of Appeals, (March 28, 2024) the Court of Appeals resolved the dispute.

Plaza Del Sol Real Estate Trust (Plaza) made $67 million in loans to OC Media Tower, L.P., and OCR Land LLC (collectively, OC Media). The loans were secured by deeds of trust and promissory notes in which OC Media agreed to pay Plaza's attorney fees for any needed collection efforts. OC Media defaulted on its loans. Plaza agreed to accept a lower payoff amount (about $50.5 million), contingent on OC Media selling its encumbered real estate. During escrow, attorney Galuppo submitted an invoice stating its fees (about $25,000) for its client Plaza. At the close of escrow, Plaza was paid the agreed upon payoff amount and Galuppo was paid its stated attorney fees.

Plaza later sued OC Media for fraud and other causes of action. Plaza alleged it learned after the close of escrow that OC Media had made false statements about its real estate sale to induce Plaza to accept less than what it was owed. OC Media filed a cross-complaint against Plaza and Galuppo for fraud and another cause of action. OC Media alleged Galuppo's attorney fees were false and unsupported.

Galuppo filed an anti-SLAPP motion to dismiss OC Media's cross-complaint. Galuppo asserted its invoice stating Plaza's attorney fees was a prelitigation demand for payment (protected petitioning activity). The trial court denied Galuppo's anti-SLAPP motion because "an allegedly false invoice for payment generally does not constitute petitioning activity under the anti-SLAPP statute."

In an anti-SLAPP motion, the trial court should distinguish between speech or petitioning activity that is mere evidence related to liability and liability that is based on speech or petitioning activity.

The Court of Appeals found that the record does not support Galuppo's assertion that its invoice was a prelitigation demand for payment. Further, the basis of OC Media's cross-complaint is not that Galuppo made a tortious demand for payment. Rather, OC Media claims the amount of attorney fees actually billed by Galuppo was fraudulent.

Appellants claimed the demand for $24,433.08 in attorney fees was a communication preparatory to and in anticipation of filing litigation. In an anti-SLAPP motion, the movant bears the burden of establishing the challenged claims arise from its protected activity. The essential elements of fraud that give rise to a cause of action for deceit or intentional misrepresentation are:


misrepresentation (false representation, concealment, or nondisclosure);
knowledge of falsity (or scienter);
intent to defraud, i.e., to induce reliance;
actual and justifiable reliance; and
resulting damage.

OC Media and OCR Land LLC sued Plaza, Galuppo, and Morris Cerullo World Evangelism for fraud and the common count of money had and received. OC Media alleged that prior to the close of escrow it had asked Galuppo to provide the amount of attorneys' fees and costs that Plaza had incurred in connection with the sale of the Property at 625 N. Main. OC Media stated that on October 16, 2020, Galuppo transmitted by email a document purporting to be an invoice through which it was represented that Plaza had incurred $24,433.08 in legal fees. OC Media alleged that the invoice was fraudulent.


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Insurer Files Interpleader to Allow Claim Payment to Proper Competing Claims Against Funds



Post 4773

See the full video at https://rumble.com/v4of8jo-whos-on-first.html  and at https://youtu.be/mCY8rYGqSGc

In an interpleader action arising out of a jury trial in Hanover Am. Ins. Co. v Tattooed Millionaire Entertainment, LLC, No. 2:16-cv-02817-JPM-tmp (W.D. Tenn. 2016) (“Hanover I”).  In Hanover I,
a jury trial was held on “insurance claims submitted to Hanover [by
Defendants in the instant case] in connection with a 2015 arson fire and
alleged theft at the House of Blues recording studio located on Rayner
Street in Memphis, Tennessee.”

In Hanover American Insurance Company v. Tattooed Millionaire Entertainment, LLC, Christopher C. Brown, and John Falls,
No. 2:20-cv-02834-JPM-cgc, United States District Court, W.D.
Tennessee, Western Division (April 4, 2024) the USDC distributed the
available funds.

The Hanover I jury held that:


Christopher C. Brown (“Brown”) and Tattooed Millionaire Entertainment, LLC (“TME”) were indistinguishable; and
Brown/TME made material misrepresentations with the intent to
deceive and committed unlawful insurance acts during the claims process,
and thus Hanover was entitled to recover the advance payments made to
Brown/TME.
The Hanover I jury also held that Falls did not make
material misrepresentations or commit unlawful insurance acts, and thus
awarded him the maximum amount covered by his policy: $2.5 million in
Business Personal Property (“BPP”) and an additional $250,000 in
Business Income (“BI”).

After the jury trial concluded, the USDC granted Hanover’s Rule 50(b)
motion for judgment notwithstanding the verdict and entered an amended
judgment denying Falls’ recovery. The Sixth Circuit, however, reversed
the post-trial ruling and remanded with instructions to reinstate the
jury verdict as to Falls, which the USDC did.

In the current action: “Hanover II,” Hanover filed its
Complaint for interpleader and declaratory relief. Hanover claims that
the $2.5 million BPP insurance awarded to Falls is subject to multiple
competing claims. Hanover’s Declaratory Relief Complaint seeks a
declaration that the $2.5 million BPP award is null and void as a matter
of Tennessee public policy. It also pleads in the alternative that the
Court must resolve the various competing claims to the BPP insurance
proceeds and declare to whom, and in what amount, those funds should be
paid.

Prior to trial the Parties stipulated to the following facts during pre-trial conference:


John Falls leased Studio B at the former House of Blues studio
located on Rayner Street in Memphis, Tennessee, and the equipment
therein from Christopher Brown who owned TME.
Falls obtained insurance from Hanover that included, inter alia, $2.5 million in coverage for BPP and $500,000 in coverage for BI.
Brown/TME had a separate policy that covered, inter alia, the structure of the studio building.
On November 5, 2015, an arson fire occurred at the House of Blues
recording studio located on Rayner Street in Memphis, Tennessee, causing
substantial damage to the building and the BPP therein.
The evidence presented at the trial of the original action (Hanover I)
established that Brown/TME falsified documents and submitted fake
invoices, phony receipts, and doctored bank account statements in
connection with the insurance claims following the fire.
In the appeal regarding the original action, the Sixth Circuit
wrote: “The jury awarded Falls $2,500,000 as the amount of insurance he
was owed, up to his policy limit, for Business Personal Property
coverage …. The BPP payment covers the loss of the gear in Falls’
studio. However, Brown is the ultimate owner of the lost gear, on which
Falls had a perpetually renewable leasehold.”








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“The Passover Seder For Americans”s”

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America for more than 300 years have become Americans and many have lost the ability to read, write and understand the Hebrew language in which the story of Passover was first told in the Torah.

Passover is one of the many holidays Jewish People celebrate to help
them remember the importance of G_d in their lives. We see the animals,
the oceans, the rivers, the mountains, the rain, sun, the planets, the
stars, and the people and wonder how did all these wonderful things come
into being. Jews believe the force we call G_d created the entire
universe and everything in it. Jews feel G_d is all seeing and knowing
and although we can’t see Him, He is everywhere and in everyone.We
understand that when G_d began to create the world there was nothing and
that time, as we know it, had no meaning. G_d created all.

Because of the creation we are able to track time and celebrate
Passover every year at the same time. We do so based on the lunar
calendar used by our ancestors not the Julian calendar modern people
use. As a result, we feel G_d gave people a conscience hoping it would
help us decide right from wrong, to do our best to make good choices, to
try to help others, not hurt others and to try to make right the wrongs
we have done to others.
The rituals that make up the Jewish holidays help remind us how
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how grateful we are to G_d for everything we have and everything we are.

Thea and Barry Zalma have created this English only Seder that works
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If you are not Jewish and interested in why Jesus celebrated the
Passover at the “Last Supper” with his disciples this show to you what
he and the disciples were celebrating.

The books are available for only $5.95.

Available as a Kindle Book  Available as a Paperback

(c) 2023 Barry Zalma & Thea Zalma

Barry Zalma, Esq., CFE  is available at http://www.zalma.com and zalma@zalma.com


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ZIFL Volume 28, Issue 4

The Source for the Insurance Fraud Professional
Subscribe here:


Zalma’s Insurance Fraud Letter (ZIFL) continues its 28th year of
publication dedicated to those involved in reducing the effect of
insurance fraud. ZIFL is published 24 times a year by ClaimSchool and is
written by Barry Zalma.  It is provided FREE to anyone who visits the
site at http://zalma.com/zalmas-insurance-fraud-letter-2/


The current issue can be read in full at
http://zalma.com/blog/wp-content/uploads/2024/02/ZIFL-02-15-2024.pdf and
includes the following articles:

Do the Crime, Serve the Time
Chutzpah: After Pleading Guilty Fraudster Tried to Reduce his Sentence
by an Appeal

After pleading guilty, Armando Valdes appealed his 60-month sentence for
health care fraud, in violation of 18 U.S.C. § 1347. Valdes’s
conviction and sentence arose out of his scheme to submit millions of
dollars in fraudulent medical claims to United Healthcare and Blue Cross
Blue Shield for intravenous infusions of Infliximab, an expensive
immunosuppressive drug. These infusions, purportedly given to patients
at Valdes’s medical clinic, Gasiel Medical Services (“Gasiel”), were
either not provided or were medically unnecessary.

Read the full article in Adobe pdf format at
http://zalma.com/blog/wp-content/uploads/2024/02/ZIFL-02-15-2024.pdf

More McClenny Moseley & Associates Issues

This is ZIFL’s twenty fourth installment of the saga of McClenny,
Moseley & Associates and its problems with the federal courts in the
State of Louisiana and what appears to be an effort to profit from what
some Magistrate and District judges indicate may be criminal conduct to
profit from insurance claims relating to hurricane damage to the public
of the state of Louisiana.

Read the full article in Adobe pdf format at http://zalma.com/blog/wp-

California Insurance Commissioner Lara Issues Consumer Fraud Alert As
Flood Recovery Begins In San Diego County

Following the recent flooding in San Diego which damaged and destroyed
hundreds of homes, businesses, and vehicles, Insurance Commissioner
Ricardo Lara put the Department of Insurance on alert for potential
fraud and illegal actions targeting flood victims.

Read the full article in Adobe pdf format at
http://zalma.com/blog/wp-content/uploads/2024/02/ZIFL-02-15-2024.pdf

Health Insurance Fraud Convictions
Guilty in Arkansas

Shaona Mizell, 52, of Paragould, Arkansas. in Pulaski County Circuit
Court on January 23, Mizell pleaded guilty to Medicaid Fraud, a class A
misdemeanor.

Read the full article in Adobe pdf format at
http://zalma.com/blog/wp-content/uploads/2024/02/ZIFL-02-15-2024.pdf

Arson and Restitution

CONVICTED ARSONIST MUST PAY RESTITUTION

A fire at a residential property destroyed several structures and made
nearly all of the owner’s personal property unsalvageable.

Insurance Fraud Attempt Defeated

THE HAWAIIAN, ATTEMPTED FRAUD DEFEATED BY A THOROUGH INVESTIGATION

The following is a fictionalized True Crime Story of Insurance Fraud
from an Expert who explains why Insurance Fraud is a “Heads I Win, Tails
You Lose” situation for Insurers.

Read the full article in Adobe pdf format at
http://zalma.com/blog/wp-content/uploads/2024/02/ZIFL-02-15-2024.pdf

Barry Zalma

Barry Zalma, Esq., CFE, now limits his practice to service as an
insurance consultant specializing in insurance coverage, insurance
claims handling, insurance bad faith and insurance fraud almost equally
for insurers and policyholders.

(c) 2024 Barry Zalma & ClaimSchool, Inc.

Please tell your friends and colleagues about this blog and the videos
and let them subscribe to the blog and the videos.

Subscribe to my substack at
https://barryzalma.substack.com/publish/post/107007808

Go to Newsbreak.com  https://www.newsbreak.com/@c/1653419?s=01

Go to X @bzalma; Read the full article in Adobe pdf format at
http://zalma.com/blog/wp-content/uploads/2024/02/ZIFL-02-15-2024.pdf




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