Zalma on Insurance Barry Zalma

ZIFL-05-15-2024Subscribe to ZIFL Here  Post 4801

Read the full 23 page issue here in Adobe pdf format.

See the full video at  https://rumble.com/v4v566z-zalmas-insurance-fraud-letter-may-15-2024.html  and at https://youtu.be/r7TbELn-Si0

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

The defendant, Vincent Chaney, appealed two orders from Superior Court denying his motions to suppress and for a new trial. In State of New Hampshire v. Vincent Chaney, No. 2022-0718, Supreme Court of New Hampshire (May 3, 2024) resolved the dispute over Chaney’s conviction.

Read the full 23 page issue here in Adobe pdf format.

This is ZIFL’s twentyeigth 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.

On April 23, 2023, MMA filed its Statement of Financial Affairs.  MMA Reported Gross Income as follows:  2024 - $803,956.63,  2023 - $12,247,362.23, 2022 - $22,596,895.00.

Read the full 23 page issue here in Adobe pdf format.

On January 2, 2024, in Kindle, paperback and hardback formats, The Compact Book of Adjusting Property Claims, Fourth Edition is now available for purchase here and here. The Fourth Edition contains updates and clarifications from the first three editions plus additional material for the working adjuster and the insurance coverage lawyer.

Read the full 23 page issue here in Adobe pdf format.

Kimberli Orr obtained no-fault automobile insurance from defendant USA Underwriters and was involved in an automobile collision. Defendant denied plaintiff’s claim for benefits because it discovered that plaintiff made material misrepresentations on her application for insurance. Defendant argued that it was entitled to rescind and void plaintiff’s insurance policy, and the trial court granted defendant summary disposition.

In Kimberli Orr v. USA Underwriters, No. 363452, Court of Appeals of Michigan (April 25, 2024) the Court of Appeals resolved the dispute.

Read the full 23 page issue here in Adobe pdf format.

Ashley Bunton-Dodson, 36, of Las Vegas, and Remedy Wellness and Resource Center, LLC (“Remedy Wellness”), were sentenced May 7, 2024 in a Medicaid fraud case involving billing for services that were not provided to Medicaid recipients.

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LDI and St. Tammany Parish Sheriff’s Office to Help Consumers Avoid Storm-Related Insurance Fraud

I usually write everything in ZIFL, but this notice is useful wherever you work or live and as you read just change “Louisiana” to your state’s name.

Read the full 23 page issue here in Adobe pdf format.

Property Investigation Checklists: Uncovering Insurance Fraud, 14th Edition provides detailed guidance and practical information on the four primary areas of any investigation of suspicious claims. The book also examines recent developments in areas such as arson investigation procedures, bad faith, extracontractual damages, The fake burglary, and Lawyers Deceiving Insurers, Courts & Their Clients During, Catastrophes—A New Type Of Fraud and the appendices includes the NAIC Insurance Information and Privacy Protection Model Act and usable forms for everyone involved in claims and will provide necessary information to the claims adjuster, SIU fraud investigator, claims manager, or coverage lawyer so he or she can be capable of excellence.

The newest book joins other insurance, insurance claims, insurance

Force Placed Insurance Charges Allow Special Defense to Foreclosure

Post 4802

In an action to foreclose a mortgage the trial court granted in part the plaintiff's motion to strike the defendant's special defenses and counterclaim; subsequently, the court, Cirello, J., granted the plaintiff's motion for summary judgment as to liability only; thereafter, the court, Spader, J., rendered judgment of foreclosure by sale, and the defendant appealed.

In M&T Bank v. Robert R. Lewis, No. SC 20817, Supreme Court of Connecticut (April 30, 2024) the appeal of a foreclosure judgment presented one question important to insurance professionals: Whether allegations of impropriety in a mortgagee's force placement of property insurance arise from the making, validity or enforcement of the mortgage for purposes of a special defense to a foreclosure action.

Robert R. Lewis claimed that the trial court improperly granted the plaintiff's motion to strike two of the defendant's special defenses arising from the plaintiff's conduct in its force placement of flood insurance on the property at issue, alleging that the plaintiff had unclean hands and breached the implied covenant of good faith and fair dealing on the ground that those defenses do not arise from the making, validity or enforcement of the mortgage.

After the defendant failed to make his monthly payment on August 1, 2017, the plaintiff notified him in writing of his default. The plaintiff subsequently elected to accelerate the note and foreclose on the mortgage. The parties participated in the state's court-supervised foreclosure mediation program but were unable to reach an agreement to modify the loan.

The trial court granted the plaintiff's motion for summary judgment as to liability only.

Defendant's claim that the trial court improperly granted in part the plaintiff's motion to strike the defendant's special defenses of unclean hands and breach of the implied covenant of good faith and fair dealing predicated on the plaintiff's improprieties in the force placement of the flood insurance, do not ''arise from the making, validity or enforcement'' of the mortgage.

In the present case, the trial court struck the special defenses of unclean hands and breach of the implied covenant of good faith and fair dealing on the ground that the defendant's allegations did not relate to ''the specific mortgage at issue in this case.'' (Emphasis added.)

The question remains whether those allegations are sufficiently related to the making, validity or enforcement of the mortgage. The Supreme Court concluded that they are. The defendant alleges, the plaintiff charged the defendant an amount greater than the ''cost'' of the insurance, in violation of section 5 of the mortgage agreement, concealed a ''kickback'' agreement that it had with ASIC. All of this alleged conduct is directly related to the plaintiff's reliance on and enforcement of section 5 of the mortgage agreement.

The Supreme Court noted that the alleged effect of the plaintiff's conduct in enforcing section 5 of the mortgage agreement-that it wrongfully increased the defendant's overall debt-provides a sufficient nexus to the foreclosure action. Defendant's allegations in support of the special defenses are sufficiently connected to the enforcement of the mortgage.

Since an action to foreclose a mortgage is an equitable proceeding it is a fundamental principle of equity jurisprudence that for a plaintiff to show that he is entitled to the benefit of equity he must establish that he comes into court with clean hands. The clean hands doctrine is applied not for the protection of the parties but for the protection of the court. It is applied not by way of punishment but on the basis of considerations that make for the advancement of right and justice.  A mortgagor who has defaulted on a mortgage is not precluded from asserting the special defense of unclean hands. Therefore, the Supreme Court took the Defendants allegations as tru

Insurance for State of Delaware Waives Sovereign Immunity



On February 15, 2023, Kimberly Letke ("Plaintiff") filed a pro se Complaint against Defendant Matthew Sprinkle ("Sprenkle") for defamation and malicious prosecution.  On October 3, 2023, Plaintiff filed another Complaint added Defendants Cpl. Tyler Beulter of the DNREC police ("Beulter") and the Attorney General of Delaware, Kathleen Jennings ("Jennings"), in which she added three additional claims: false arrest and violations of public trust, unlawful detention, and violations of her rights under the Fourth Amendment to the United States Constitution.

In Kimberly Letke v. Matthew Sprenkle, CPL. Tyler Beulter, and Attorney General Kathleen Jennings, C.A. Nos. S23C-10-019 CAK, S23C-10-002 CAK, Superior Court of Delaware (May 6, 2024) the court was faced with a Motion to Dismiss based upon sovereign immunity.

Sprenkle hunted and harvested a deer in Cape Henlopen State Park, allegedly trespassing on Plaintiff's neighbor's property to reach the Park. Plaintiff shouted at Sprenkle and called the police. The police spoke with Sprenkle and ultimately arrested Plaintiff for a violation of the Delaware statute prohibiting impeding lawful hunting. The charge was ultimately dropped. Plaintiff's claims, including those for defamation and malicious prosecution spring from that incident and the statements that Sprenkle allegedly made to Beulter about Plaintiff.

The doctrine of sovereign immunity provides that the State of Delaware, including its agencies, can only be sued by consent, or by an express act of the General Assembly. When the State has not waived sovereign immunity, the Court does not have to consider whether the State Tort Claims Act is applicable. The Court has dismissed in the past claims against Delaware state agency defendants where the state agency defendants submitted an affidavit from the Insurance Coverage Administrator of the State of Delaware affirming that the State had not purchased any insurance coverage for such claims. Without a waiver of sovereign immunity, the Court held that plaintiffs' claims were barred, and therefore, the Court was not required to consider whether the State Tort Claims Act was applicable.

Assuming arguendo that there is not absolute sovereign immunity for Beulter, or that the State has waived sovereign immunity with respect to him or his agency, the doctrine of qualified immunity bars Plaintiff's claims against Beulter. When properly applied, qualified immunity protects all but the plainly incompetent or those who knowingly violate the law.

Plaintiff's claims against Beulter are founded upon an alleged act or omission arising out of the performance of his official duty, and, therefore, is barred by the qualified immunity statute.

First, all actions surrounding Plaintiff's arrest were in the performance of an official duty.

Second, there is nothing in the Complaint, other than what may be fairly read as mere accusations, that indicates Beulter was not acting in good faith.

Third, there is nothing in the Complaint that indicates that Beulter acted with gross or wanton negligence.

For the reasons discussed above, Defendant Beulter's Motion to Dismiss was GRANTED.

No one likes being arrested. Regardless you cannot sue a police officer or a prosecutor for defamation if everything they did was part of their official duties. The state of Delaware allows the state to waive sovereign immunity only if the state has bought insurance to protect it against such claims. Since there was no insurance protecting the officer he was immune from the suit.



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Three Cases Dismissed Because of Suit Against an Insurer who Did Not Insure the Plaintiff



Texas Law Firm McClenny, Moseley & Associates (MMA) has had serious problems with the US District Courts in 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. In April and May several cases have been the subject of motions for Summary Judgment from insurers who were sued by MMA who was sanctioned by the District Courts and new lawyers took over the cases only to find the plaintiffs had no right to sue since they were not insured by the insurer defendants. For a representative sample note the information from the following three cases:


In Ave Duruisseau v.  Farmers Property & Casualty Insurance Co, No. 6:22-CV-03860, United States District Court, W.D. Louisiana, Lafayette Division (April 26, 2024) Summary Judgment was granted because there was no genuine issue of material fact for trial because Farmers did not insure Plaintiff's property.
In Hester Cole v.  Foremost Insurance Company Grand Rapids Michigan, No. 2:22-CV-03514 United States District Court, W.D. Louisiana, Lake Charles Division (April 26, 2024) the court granted Summary Judgment because there was no genuine issue of material fact for trial because Foremost did not insure Plaintiff's property on August 27, 2020.
In Terry Ramirez v. Atlantic Casualty Insurance Co, No. 2:22-CV-04797, United States District Court, W.D. Louisiana, Lake Charles Division (May 7, 2024), James D. Cain, Jr. United States District Judge, dealt with a Motion for Summary Judgment filed by defendant Atlantic Casualty Insurance Company (“Atlantic Casualty”). The motion was unopposed. The details were a little different.

The suit dealt with alleged damage to a residence located at 2026 7th Avenue, Lake Charles, Louisiana, in Hurricane Laura, which made landfall in Southwest Louisiana on August 27, 2020, and Hurricane Delta, which impacted the same area on October 9, 2020. Plaintiff, who was then represented by counsel from the law firm of McClenny Moseley & Associates, filed suit in this court against Atlantic Casualty on August 25, 2022, raising claims of breach of insurance contract and bad faith. Therein he represented that he was the owner of the property represented at 2026 7th Avenue and that the property was insured under a policy issued by Atlantic Casualty. All cases filed by plaintiff's counsel were suspended due to concerns about misconduct committed by that firm. New counsel enrolled for plaintiff on July 11, 2023, and the stay was lifted.

Atlantic Casualty moved for summary judgment, showing that plaintiff is not the owner of the insured property and is not listed as a named insured under the policy and requested that the court dismiss plaintiff's claims with prejudice.

Louisiana law provides that an insurance policy is a contract and that its provisions are construed using the general rules of contract interpretation in the Louisiana Civil Code. The policy at issue is a commercial lines policy that provides lessor's risk coverage to several dwellings, including the one at 2026 7th Avenue. Doc. 20, att. 3, pp. 5-6. Darrell and Shirley Crochet are listed as the named insureds. According to Atlantic Casualty's records, they are also the owners of 2026 7th Avenue and plaintiff was a tenant at that address. The policy provides that certain individuals, such as employees, may be considered insureds in connection with the business run from that property. However, there is no basis under the policy to consider that the tenant has an insurable interest in the immovable property. Accordingly, plaintiff cannot maintain a claim for breach of contract against Atlantic Casualty. In the absence of a valid contractual claim, plaintiff's bad faith claims must also fail. The Motion for Summary Judgment was grante

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