Zalma`s Insurance Fraud Letter

Transcription

Zalma’s Insurance
Fraud Letter
The Essential Resource For The Insurance Fraud Professional
A ClaimSchool ™ Publication, Written by Barry Zalma, Esq., CFE
© 2015 ClaimSchool, Inc. & Barry Zalma
Go to Zalma Books – E-Books and Articles by Barry Zalma –
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Volume 19, No. 23
December 1, 2015
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Go to my blog Zalma On Insurance at http://zalma.com/blog
Quote of the Issue
“There is no distinctly native American criminal class except Congress.”
Mark Twain
Refuse to Submit to EUO - Lose Everything
Insureds sued the homeowners/tenants insurer to recover on burglary claim. The Circuit Court entered
summary judgment in favor of insurer based on insureds’ failure to submit to examinations under oath (EUO)
prior to filing suit. policy. This appeal presents issues arising from a condition in the insurance contract which
required each insured to submit to examinations under oath while not in the presence of any other insured.
In Richard Goldman and Patricia Goldman v. State Farm Fire General Insurance Company, 60 So.2d 300,
Aug. 16, 1995. The Florida Court of Appeal was asked to not enforce EUO condition after suit was filed and
insured submitted to deposition claiming that the EUO requirement is not a condition precedent.
FACTS
In June 1992, appellee issued a homeowners/tenants insurance policy to appellants which included personal property and contents
coverage. The appellants’ residence was burglarized on October 8, 1992, and they submitted a sworn proof of loss setting forth their claim
under the policy. Appellee then began investigating appellants’ claim and the circumstances surrounding the loss. On December 30, 1992,
as part of its investigation, appellee demanded in writing that both appellants submit to an examination under oath as well as produce
certain documents and records. Such demand was made pursuant to a policy condition requiring the insured to submit to an examination
under oath. In a section entitled “Suits Against Us,” the policy expressly provides that “no action shall be brought unless there has been
compliance with the policy provisions.”
The examinations under oath were initially scheduled for January 14, 1993, but were rescheduled at the request of appellants’ counsel.
There is no genuine factual dispute that appellants were aware of appellee’s request that they submit to examinations under oath at a
mutually convenient time and place as contemplated by the policy.
On January 19, 1993, appellants filed suit against appellee for breach of the insurance contract, maintaining that although they had
complied with all conditions precedent necessary to entitle them to recovery under the insurance policy, appellee had refused to pay their
claim. On the same date that suit was filed, appellants’ attorney wrote to appellee’s counsel suggesting that the sworn statements be
renoticed as depositions in accordance with the Florida Rules of Civil Procedure. Appellee, by letter dated March 1, 1993, renewed its
requests for appellants to submit to examinations under oath.
On March 30, 1993, appellee moved for summary judgment on its affirmative defenses of
noncompliance with the policy provisions arguing that appellants’ failure to submit to examinations
under oath prior to filing suit constituted a material breach of the policy terms as well as a failure to
satisfy a condition precedent to filing suit on the insurance policy. In support of its motion, appellee
submitted affidavits to the effect that it had been unable to complete its investigation due to
appellants’ failure to submit to an examination under oath; that appellee had neither made payment
of the loss nor denied the claim due to its inability to complete its investigation; and that appellants
had commenced their legal action against appellee prior to the taking of the examination under oath.
In opposition to the motion for summary judgment, appellants in their opposing affidavits stated that
they had complied with the requests of appellee in regard to their claim under the insurance policy to
the best of their ability and that, at no time, had they refused to submit to a sworn statement under oath by appellee.
Zalma's Insurance Fraud Letter -- Page 1 of 19
ANALYSIS
Appellants argued on appeal that summary judgment was improper because genuine issues of material fact existed as to whether appellants’
failure to submit to the examination was material and whether such failure resulted in substantial
prejudice to appellee. Because a finding of prejudice is not essential to a resolution of the legal issues
raised in this case, the appellate court found that appellants have failed to establish the existence of any
genuine issue of material fact which would preclude the entry of summary judgment.
An insured’s refusal to comply with a demand for an examination under oath is a willful and material
breach of an insurance contract which precludes the insured from recovery under the policy. Southern
Home Ins. Co. v. Putnal, 57 Fla. 199, 49 So. 922, 932 (Fla.1909) (insured’s refusal to comply with policy
condition that insured submit to an examination under oath “will preclude the insured from recovering
upon the policy, where it provides that no suit can be maintained until after a compliance with such
condition”); Stringer v. Fireman’s Fund Ins. Co., 622 So.2d 145 (Fla. 3d DCA), review denied, 630
So.2d 1101 (Fla.1993). Other jurisdictions have similarly interpreted the examination under oath
requirement of an insurance policy, holding that failure to submit to examination under oath is a material
breach of the policy terms and a condition precedent to an insured’s right to recover and/or bring suit under the policy.
The determinative issue in this case is whether the policy provision requiring the insured to submit to a sworn examination outside the
presence of the other insured is a condition precedent to filing suit. A substantial line of cases supports the rule that an insurer need not
show prejudice when the insured breaches a condition precedent to suit. On the other hand, if the provision is a cooperation clause, the
burden would be on the insurer to demonstrate substantial prejudice before a breach would preclude recovery under the policy.
The appellate court concluded that the policy provisions requiring appellants to submit to examinations under oath are conditions precedent
to suit rather than cooperation clauses. Notwithstanding appellants’ affidavits to the contrary, the giving of
recorded statements or the taking of depositions with both sides present does not constitute substantial
compliance with the policy conditions.
The post-suit deposition did not obviate any prejudice to appellee. The policy does not provide that depositions
may be substituted for examinations under oath as appellants suggest. Rather, depositions and examinations
under oath serve vastly different purposes. First, the obligation to sit for an examination under oath is
contractual rather than arising out of the rules of civil procedure. Second, an insured’s counsel plays a different
role during examinations under oath than during depositions. Third, examinations under oath are taken before
litigation to augment the insurer’s investigation of the claim while a deposition is not part of the claim
investigation process. Fourth, an insured has a duty to volunteer information related to the claim during an
examination under oath in accordance with the policy while he would have no such obligation in a deposition.
Finally, the insurer has the right to examine the insured independently in sworn examinations while it would have no parallel right to do so
under the Florida Rules of Civil Procedure. Furthermore, since the insurance policy clearly requires compliance with all of its requirements
in order for appellants to bring this action, appellants’ failure to comply with any one of the conditions as a matter of law would be
sufficient grounds for upholding the lower court’s order.
Since forfeitures are not favored, this court has considered the possibility of remanding the case with directions that appellants submit to an
examination under oath. However, we decline to exercise this option since any belated compliance by appellants more than two (2) years
subsequent to the loss and the commencement of suit would satisfy neither the spirit nor intent of the policy conditions at issue.
The court held, therefore, that the policy provision at issue is a condition precedent to suit and that appellants’ noncompliance precludes an
action on the policy regardless of a showing of prejudice by the insurer.
ZIFL OPINION
This decision was affirmed in Studio Imports, Ltd., Inc. v. Landmark American Ins. Co., November 12,
2015--- So.3d ----2015 WL 7018754 without comment by the majority and subject to a dissent that claimed
the EUO condition was a condition subsequent and not a condition precedent. The dissent carries no weight
and it should be clear that in Florida and most states refusal or failure to testify at EUO is sufficient ground to
deny a claim in its entirety. Every insurance professional should be ready to demand EUO in proper cases and
to deny the claim if the insurer refuses or fails to appear after giving sufficient extensions of time when
requested.
Proformative Academy
I have prepared webinars for Proformative Academy on various subject that might be of interest to you. They include:
Insurance Fraud - An Overview
I have created for Proformative Academy two webinars called “Insurance Fraud - An Overview” that is available at
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Insurance policies. Both come with a 10% Discount for my friends and clients who sign up and enter the discount code: Zalma10.
Insurance Fraud is estimated to take between $80 and $300 billion a year from the property and casualty insurance industry, raising the
prices each person pays for insurance by more than $300 a year. It explains to those attending what insurance fraud is, various methods by
which insurance fraud is perpetrated, and the various weapons provided by statutory law, legal precedent and professional claims handling
to work to reduce the amount stolen by fraud perpetrators. It explains the use of red flags or indicators of insurance fraud and the use of an
insurance company Special Investigation Unit (SIU) to gather the evidence necessary to assist in the defeat of insurance fraud.
How To Successfully Present a Commercial Property Insurance Claim
No business can operate profitably without insurance to protect it against contingent or unknown catastrophic losses. By
spreading the risk among many businesses, insurers can charge reasonable sums to protect against losses to the business
or its real and personal property. As you listen to an internationally recognized insurance coverage lawyer, author,
consultant and expert witness explain how to gather the information necessary to present a claim to your insurance
company and collect the information required to effectively present a claim to gain full indemnity, you will be convinced
you can do so with minimal or no assistance.
http://www.proformative.com/courses/how-successfully-present-commercial-property-insurance-claim
How to Read & Understand Business Insurance Policies
No business can operate profitably without insurance to protect it against contingent or unknown catastrophic losses.
By spreading the risk among many businesses, insurers can charge reasonable sums to protect against losses to the
business or its real and personal property. In this course you will listen to an internationally recognized insurance
coverage lawyer, author, consultant and expert witness explain why and how an insurance policy provides protection
for the business. A business person with the ability to read and understand the insurance policies they acquire has an
advantage over every other business person who cannot read and understand a such policies.
Continuing Education Credit available for many, including Certified Fraud Examiners with 1.5 CPE Credits, in Fraud
Prevention and Deterrence. I hope you find it interesting and informative.
http://www.proformative.com/courses/how-to-read-understand-business-insurance-policies
New from Barry Zalma
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Quick Overview
Insurance Law is the most comprehensive, and yet practical, insurance law authority available today. Written by
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insurance and provides the experienced litigator analyses of today’s leading insurance law decisions nationwide.
Insurance Law is the most comprehensive, and yet practical, insurance law authority available today.
This book is ideal for any professional who works in or frequently interacts with the insurance industry. Claims
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Additional books at the Zalma Insurance Claims Library
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In addition the standard FC&S Online published by The National Underwriter Company now includes a Fraud Channel with the majority of
the information taken from my work on insurance fraud. It is available at http://www.nationalunderwriterpc.com/Pages/default.aspx. The
Fraud Channel covers issues like: Fraud Basics, Checklists and Charts, Investigation, Ethics, Reference Materials, Fraud Of The Week, and
both the full text and summaries of insurance fraud Cases.
Fraud Conviction Affirmed
Kim Zaffino appealed from the judgment and sentence entered in the Bucks County Pennsylvania Court of Common Pleas following her
jury trial conviction for attempted theft by deception, and insurance fraud. In Commonwealth of Pennsylvania, v. Kim A. Zaffino, No. 3261
EDA 2014, Filed Nov. 10, 2015 the appellate court was called up to determine if there was sufficient evidence to convict Zaffino and if the
sentence handed down by the trial court was appropriate.
FACTS
On August 27, 2010, Zaffino signed an agreement to lease her property at 721 Country Club Lane in Warrington, Pennsylvania to Scott and
Jennifer Beverly. At trial, Jennifer Beverly testified that she saw an ad listing the Zaffino’s 721 Country Club Lane property for rent on
Craigslist and contacted the Zaffino. The family moved into the house in October of 2010, and they were evicted in late March or early
April of 2011 for failure to make rent payments. A constable was present on the day the Beverlys moved out to ensure smooth transition.
Ms. Beverly said that aside from a cracked toilet tank, the house was in the same condition as when the family moved in. Scott Beverly
stated that the family did not damage the house in any way but that they left some trash in the garage.
On March 19, 2011, Zaffino emailed Allstate agent Ralph Heffley, stating that: “I need to make changes to my Home Owners
Policy—effective immediately. My policy number is 9 08 543551 03/31. I have moved out of the
property and would like to insure it for tenants and against any potential damages they may cause.” Mr.
Heffley advised the Appellant that she did not qualify for a landlord policy.
On April 19, 2011, Zaffino reported a claim under her homeowner’s policy to Allstate for damage to her
721 Country Club Lane property. Mr. Heffley explained to the Zaffino that the damage might not be
covered because she did not have the correct policy in place.
On May 13, 2011, Allstate Senior Claims Analyst Terri Hemler and Allstate Property Adjuster Alan
Duddy conducted a recorded telephone statement with the Zaffino regarding her claim. During the
interview, the Zaffino stated that she had hired Scott Beverly to perform work at her house and that he
and his family damaged the property while staying there without permission. Zaffino stated that “I had
no idea that he had moved into the property ... I indicated to him that he was not to stay there. He was not to live there, that was my
residence and not his ... As far as I know, nobody was actually living there.” Additionally, Zaffino stated that “[t]here was no agreement for
them to stay at all. I told them that they couldn’t maintain that as a residence. It was my residence.”
Zaffino also noted that “[w]hen I found out that they were there, I told them that they could not stay. That if they were working late hours,
they needed to make arrangements to leave but that they could not sleep overnight in that property.” Furthermore, Zaffino said that “[t]here
was no lease. There was no rent. There was no payment of rent. There was no expectation of payment of rent because they were not to stay
there. That wasn’t a residence for them.”
Based on the inconsistent statements regarding Zaffino’s arrangement with the Beverlys, Allstate referred the claim to Special Agent Mark
Sabo with the Attorney General’s office for further investigation. Based on Agent Sabo’s investigation, the Attorney General’s office
brought charges against Zaffino on January 28, 2014.
Following a three-day trial, a jury convicted Zaffino of attempted theft by deception and insurance fraud. The trial court sentenced Zaffino
to one year of probation on each conviction, for an aggregate sentence of two years’ probation.
Insurance Fraud
Under the Crimes Code, an individual commits the crime of insurance fraud if the individual:
Knowingly and with the intent to defraud any insurer or self-insured, presents or causes to be presented
to any insurer or self-insured any statement forming a part of, or in support of, a claim that contains any
false, incomplete or misleading information concerning any fact or thing material to the claim. [18
Pa.C.S. § 4117(a)(2).]
The trial court concluded that the conviction for insurance fraud is supported by evidence that Zaffino made false statements to Allstate
agents regarding the Beverlys’ status as tenant at her property, and that she did so knowingly and with the intent
to defraud Allstate. The evidence showed that Zaffino made false statements to Allstate during the recorded
statement because Zaffino insisted to Ms. Hemler and Mr. Duddy that the Beverlys were not leasing her property
and that she specifically told them on multiple occasions that they were not to stay there. Furthermore, during
conversation with Mr. Heffley, Zaffino was advised that she needed renter’s insurance and that she was denied it.
The appellate court agreed with the trial court that the Commonwealth presented sufficient evidence for the jury
to find every element of insurance fraud beyond a reasonable doubt.
ZIFL OPINION
The insurance fraud issue was obvious. Zaffino knew that she was not eligible for insurance as a landlord so tried
to change her situation and claim that the tenants were not tenants but squatters. She failed because she also filed
for a court order to evict her tenants and had a constable present to keep the peace as they were evicted. Assuming
that an insurer would not check the public records resulted in her conviction. She was only sentenced to probation
and should have accepted that she was guilty and enjoy her freedom since she could have been sentenced to five years in prison.
E-Books from Barry Zalma
“Insurance Fraud and Weapons to Defeat Fraud“
Insurance fraud continually takes more money each year than it did the last from the insurance buying public. There is no
certain number because most attempts at insurance fraud succeed. Estimates of the extent of insurance fraud in the United
States range from $87 billion to more than $300 billion every year.
Insurers and government backed pseudo-insurers can only estimate the extent they lose to fraudulent claims. Lack of
sufficient investigation and prosecution of insurance criminals is endemic. Most insurance fraud criminals are not detected.
Those that are detected do so because they became greedy, sloppy and unprofessional so that the attempted fraud becomes
so obvious it cannot be ignored.
No one will ever be able to place an exact number on the amount lost to insurance fraud. Everyone who has looked at the issue knows –
whether based on their heart, their gut or empirical fact determined from convictions for the crime of insurance fraud – that the number is
enormous.
When insurers and governments put on a serious effort to reduce the amount of insurance fraud the number of claims presented to insurers
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“Getting the Whole Truth”
The interview is an essential form of fact gathering for every type of human interaction. Interviews happen
everywhere; they are performed by almost everyone. Interviewing is also an art, and the most effective
interviews are conducted by those who are knowledgeable and skilled in this art.
The purpose of an interview is to uncover the truth; the method of uncovering the truth is the art of the
interview. The standard interview does not have, nor should it be given, the pejorative sense conveyed by the
expression “giving someone the third degree.” Interview professionals do not use rubber hoses or hot lights, or
subject the interviewee to torture. In their limited arsenal, professionals do not have the power of the state, the
reputation of the FBI, the majesty of a court trial, nor the intimidation of a search warrant.
Civil interviewing professionals are, therefore, compelled to get the information they need by intelligence, wit,
skill, and experience. They must be masters of the social graces; they must know how to put people at ease. The
skill of the professional causes the person being interviewed to actually want to give information to the interviewer. When the interview is
successful, the subject becomes a virtual partner with the professional in the effort to uncover the truth, the whole truth, and nothing but the
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This ebook will help anyone who needs to obtain information from anyone else gain the information needed whether a business person,
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The book will be delivered to you by e-mail shortly after purchase.
“Random Thoughts on Insurance - Vol. III“
Since 2010 I have been writing a blog post at least five days a week. This e-book is a collection of those posts that reveal my interest in
insurance case law. Some of the cases reviewed were important. Some were of first impression. Others will be totally unimportant. All were
interesting to me and I hope are interesting to the reader. This e-book is more than 1200 pages of my review of interesting cases from 2013
through January 2014.
After you purchase please wait for the e-book to upload from PayPal. If it does not upload please e-mail [email protected] and I will
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Fortuity – Necessary to Understand Insurance Fraud
Before insurance fraud can be fully understood it is essential to understand that, as the Restatement of Contracts, Section
291, states insurance is:
A fortuitous event . . . is an event which so far as the parties to the contract are aware, is dependent on
chance. It may be beyond the power of any human being to bring the event to pass; it may be within the control of third
persons; it may even be a past event, such as the loss of a vessel, provided that the fact is unknown to
the parties.
Similarly, California Insurance Code Section 22 provides:
Insurance is a contract whereby one undertakes to indemnify another against loss, damage, or liability
arising from a contingent or unknown event.
A fraudulent claim – one made with the intent to deceive an insurer to its detriment – can never be fortuitous, contingent or due to an
unknown event.
It is essential that every person involved in the work to defeat insurance fraud understand the often unstated
exclusion of fortuity. That is, for insurance to apply there must be an accident, a fortuitous event.
The investigator that collects evidence that establishes, by a preponderance of the evidence, that the claim was
based on an intentional act, a fraud, or some event that was not accidental has established that there is no
coverage. It is not necessary to prove that the insured intended to defraud the insurer only that the acts were
not fortuitous, that the event was known before the policy was acquired or that it was not a contingent event.
Contrary to statements made by politicians, insurance is not a right. Insurance is not a means of curing social ills. Insurance is not a means
of curing environmental problems. Insurance is not designed to protect against known losses. Insurance is not issued to protect against
intentional acts. Insurance is not available to protect against a loss that happened before the policy is purchased. Insurance only protects the
person insured from certain designated risks of loss that are both contingent and unknown at the time the policy is acquired.
Politicians and courts – faced with a horrendous fact situation – attempt to make insurance something it is not, a charitable institution that
pays losses the insurer did not agree to pay by the words of the insurance contract. The California Courts of Appeal and Supreme Court
have struggled with this concept for many years as a result of the discharge of pollutants from the Stringfellow acid pits and other polluted
properties.
In State v. Continental Insurance Co., 169 Cal.App.4th 1114, 170 Cal.App.4th 160, 88 Cal.Rptr.3d 288
(Cal.App. Dist.4 01/05/2009), the California Court of Appeal, appears to have ignored the definition of
insurance established by California Insurance Code § 22 and has allowed the state of California to stack
all coverages it had for a loss that continued over a very long period of time. The Court of Appeal, in a
lengthy decision, ignored a key concept of insurance law: that a loss, to be covered, must be contingent
or unknown to the insured.
The State of California sought to recover from its liability insurers the amounts that a federal court had
ordered the state to pay as much as $500 million for the cleanup of a hazardous waste site that first
started leaking pollutants in 1969 and that continued to cause damage over a long period of time. The
court described the factual basis for the suit as follows:
In 1969, heavy rains caused contaminants to overflow the dam. In 1972, groundwater contamination
was discovered, and the site was closed. However, it continued to leak. In 1978, heavy rains once again
made the ponds overflow; the State decided to allow a “controlled discharge” of contaminants into
Pyrite Channel. Hazardous waste released from the site merged into a plume that ultimately extended
miles away.
The Federal Court master outlined the problem as follows:
The hazardous waste disposal facility was opened in 1956. At the direction and under the control of the
State, more than 30 million gallons of liquid industrial waste were deposited in the Stringfellow ponds
during the facility’s operation; the State closed the site to new deposits in 1972 after the discovery of
groundwater contamination...By 1960, a State expert found, chemical pollution was seeping into the
groundwater through the fractured rock and around the ends of the barrier dam, which had been
negligently constructed. A plume of contaminated groundwater moved down gradient from the site.
In addition to underground leaking, two major overflow episodes occurred at the site. In March 1969, a
rainstorm of around 20 inches (statistically expected to occur no more than once every 50 years),
following on earlier heavy rains in January and February, flooded the site, causing the waste ponds to
overflow and send polluted water down the canyon. In March 1978, again following extraordinarily
heavy rains, the ponds were once more near overflowing and the retention dam began to fail. The State
made a series of controlled discharges from the ponds, releasing about one million gallons of diluted
waste down the Pyrite Creek channel.
The policies issued by the insurer defendants covered periods from 1964 until 1975 dates after the state
first became aware of the pollution because a “State expert found, chemical pollution was seeping into
the groundwater through the fractured rock and around the ends of the barrier dam, which had been
negligently constructed. A plume of contaminated groundwater moved down gradient from
the site.”
The trial court ruled that every excess liability policy in effect for any policy period during which the
hazardous waste loss was occurring covered the entire loss sustained by the state, subject to the policy limits;
that the policies could not be stacked; and that the insurers were entitled to a setoff for prior settlements. The
policies defined an occurrence to include a continuous or repeated exposure to conditions.
The Court of Appeal reversed the judgment and remanded the case back to the trial court for
further proceedings. The court held that the continuous injury trigger of coverage was applicable
and that under the all-sums approach, every insurer that issued a liability policy for any period
during which a continuous loss occurred was liable for the full extent of the loss up to the policy’s
limits. The court determined that the state was entitled to stack the policy limits of all applicable
policies across all applicable policy periods.
There was only a single occurrence, which was the deposit of hazardous waste at an unsuitable
site. In light of the court’s reversal of the trial court’s no-stacking ruling, a challenge to the setoff
ruling was moot.
This, however, seems to conflict with the recent decision of the California Supreme Court that concluded: “the proper focus of analysis here
is on discharges from the ponds, rather than deposits to them.”
Justice Richli, writing for the Court of Appeal noted that:
In this action, the State of California (the State) seeks to recover from its liability insurers the amounts
that a federal court has ordered it to pay for the cleanup of the Stringfellow hazardous waste site. Some
insurers were granted summary judgment; the propriety of that ruling is currently before the California
Supreme Court in State of California v. Underwriters at Lloyd’s London (2006) 146 Cal.App.4th 851
[54 Cal. Rptr. 3d 343], review granted April 18, 2007, S149988. Other insurers settled with the State.
At the time of the appeal only six insurers were left litigating: Continental Insurance Company (Continental), Continental Casualty
Company (Casualty), Employers Insurance of Wausau (Wausau), Horace Mann Insurance Company (Horace Mann), Stonebridge Life
Insurance Company (Stonebridge), and Yosemite Insurance Company (Yosemite) (collectively the Insurers).
Each of them had issued to the State an excess corporate general liability policy covering a two- or three-year
policy period. The State was held liable for all past and future remediation costs, which the State claims could be
as much as $ 700 million. The Insurers stipulated that the State was liable for at least $ 50 million.
The state of California was ordered by a federal court to clean up the pollution caused by the construction and
use of the Stringfellow Acid Pits in Riverside County, California that is anticipated to cost the state as much as
$700 million. The state that may not be able to fulfill the order because of a lack of assets and because of
growing budget deficits turned to the California Supreme Court to obtain funds from the insurers who insured the state while the pits were
constructed and the period when the pits polluted the land and water of Riverside County. To fulfill its obligation to clean up the pollution
the state needed as much money as it could squeeze from its insurers.
The California Supreme Court considered the complex questions of insurance policy coverage interpretation that arose in connection with a
federal court-ordered cleanup of the state’s Stringfellow Acid Pits waste site. The Supreme Court initially addressed the “‘continuous
injury’ trigger of coverage,” as that principle was explained in Montrose Chemical Corp. v. Admiral Ins. Co. (1995) 10 Cal.4th 645, 655
(Montrose) and the “all sums” rule adopted in Aerojet-General Corp. v. Transport Indemnity Co. (1997) 17 Cal.4th 38, 55-57 (Aerojet).
The California Supreme Court brought to an end the dispute that started in the 1960?s when the Stringfellow Acid Pits began to leak.
In this case the state, as insured, was or should have been, aware of an ongoing progressive loss after 1960 when the state was made aware
that contaminants were overflowing the Stringfellow pits. Once it had that knowledge it was obligated to so advise the insurer of a claim
and all future insurers of the ongoing loss so that they could properly underwrite the risk. Failure to do so is a concealment of a material
fact.
ZIFL OPINION
Therefore, in my opinion, any policy purchased after 1960, even if the state was unaware of the extent of
the damage, the fortuity doctrine or “loss in progress” rule, where damage has begun to occur prior to
the inception of the policy no part of the loss may be insured against. (See e.g., Summers v. Harris, (5th
Cir. 1978)573 F.2d 869, 872; Presley v. National Flood Insurers Association (E.D. Mo. 1975) 399 F.
Supp. 1242). Unfortunately, for the insurers, I do not sit on the California Supreme Court so their
decision must be followed until they change their mind and decide, in some future case, to enforce the
fortuity requirement.
California Supreme Court
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Strange Testimony
Every lawyer preparing a witness to testify always explains that it is essential that the witness, who will be under oath,
tells the truth and does not even attempt to stretch the truth. When the witness fails or refuses to follow the good
advice provided by the lawyer, terrible things usually happen.
A jury awarded a plaintiff more than $55 million in a recent bad faith trial. Perhaps the reason for the verdict, which
was mostly punitive damages, was the following testimony given in a trial in California while the witness, who
represented an insurer and was actually handling the claims as potentially covered, answered a question by saying that
there was no coverage. The judge intervened in front of the jury, much to the insurer’s dismay:
THE COURT: So you knew it was false when you verified it under penalty of perjury based on your
own understanding of the underlying facts? Is that what you’re telling us?
THE WITNESS: What was false, Your Honor?
THE COURT: It’s false that there was, in fact, a potential for coverage. . . You told us that already
today. And what you’re telling me is that you signed this under penalty of perjury, and you knew it was
false?
THE WITNESS: No, Your Honor. This is not false. I was handling my claims because there was a
potential for coverage under all those claims. But these verifications, RFAs, were legal positions
that were being taken in this coverage litigation, so ...
THE COURT: So you knew that the underlying facts were that it was true that
there was a potential for coverage, and yet you write in your verification that
you declare under penalty of perjury that the foregoing responses are true and
correct?
THE WITNESS: Right, because that was true and correct to the legal position
that was being taken.
THE COURT: Oh, okay.
THE WITNESS: So I wasn’t being inconsistent.
THE COURT: I understand now. The facts don’t matter. Is that what you’re telling me?
THE WITNESS: The facts don’t matter in this litigation.
THE COURT: All right. May I see counsel in my chambers.
When the lawyers returned to the courtroom, the witness was excused in mid-testimony. When she returned to the courtroom the next day,
the witness had her own counsel and invoked the Fifth Amendment against self-incrimination. The insurer faces a December criminal
contempt trial over its handling of discovery and the judge already imposed more than $152,000 in sanctions against the insurer for multiple
discovery abuses, including an attempt to conceal non-privileged documents by including them on an attorney-client privilege log.
Read details about the case at:
http://www.corpcounsel.com/id=1202742472251/AIG-Subsidiaries-Get-Slammed-With-Punitives-Following-Contentious-Trial?mcode=0&
curindex=0&curpage=ALL
Barry Zalma
Barry Zalma is the principal of Zalma Insurance Consultants. He is available for consultation on any and all
insurance issues faced by you or your clients.
Barry Zalma founded ZIC to help resolve every insurance claim problem faced by you or your clients. His
experience and skill as a consultant and expert witness can make the difference before a jury or other trier of fact.
For more than 45 years as a claims person and insurance coverage attorney, Barry Zalma has represented insurers,
advised insurers on claims handling, interpreted coverages and testified as an insurance coverage, insurance bad
faith, insurance claims handling and insurance fraud expert on behalf of insurers and policy holders’ suing insurers.
Mr. Zalma has been rated “AV Preeminent” for 25 years and is an internationally recognized expert on insurance, insurance claims
handling, insurance coverage, insurance fraud, and insurance bad faith. Barry Zalma will promptly review your file materials and advise
you about the viability of your decision to sue or your defenses. He can help you narrow the scope of discovery.
Consultation with Mr. Zalma and ZIC can save you or your client thousands of dollars in the defense or
prosecution of an insurance dispute. ZIC will assist you in the effort to find a solution to an insurance claims
dispute that is fair, intelligent, beneficial and economical.
ZIC is available to provide expert advice and, if needed, expert testimony to individuals and their counsel. Advice
from ZIC is indispensable to the resolution of insurance disputes. Consultation from ZIC can save you, your
counsel or client hundreds of hours of investigative and legal work.
With comprehensive knowledge of insurance and insurance claims handling Mr. Zalma understands, and can
explain in language a lay jury understands, how and why insurance claims should be resolved.
ZIC rates are all inclusive. Mr. Zalma’s hourly fee takes account of all incidentals from telephone calls and
postage.
Wisdom
“It is a principle incorporated into the settled policy of America, that as peace is better than war, war is better than
tribute.” — James Madison
“Our cause is noble; it is the cause of mankind!” — George Washington
“America was not built on fear. America was built on courage, on imagination, and on an unbeatable determination
to do the job at hand.” — Harry S Truman
“The bosom of America is open to receive not only the opulent and respectable stranger, but the oppressed and
persecuted of all nations and religions; whom we shall welcome to a participation of all our rights and privileges, if
by decency and propriety of conduct they appear to merit the enjoyment.” — George Washington
“Character cannot be developed in ease and quiet. Only through experience of trial and suffering can the soul be strengthened, vision
cleared, ambition inspired, and success achieved.” - Helen Keller
“If it be asked, What is the most sacred duty and the greatest source of our security in a Republic? The answer would be, An inviolable
respect for the Constitution and Laws — the first growing out of the last.” — Alexander Hamilton
“The unexamined life is not worth living” - Socrates
“
Barry Zalma is On World Risk & Insurance News
Check out my “Who Got Caught” submissions at http://www.wrin.com and scroll down to “Who Got Caught.”
Good News From the
* The former manager of a Tampa, Fla.-area agency lifted $142,560 in commission and bonus checks.
Heidi Calonge was lead agent and manager of Express Insurance, which specializes in auto coverage. She posed
as the owner, opening a P.O. box under the fake name Express Insurance of Lakeland. Calonge filed corporate
paperwork and opened a personal bank account under the name. She then had the real insurer’s paperwork
forwarded from the P.O. box to her home address. Calonge used much of the money to open competing agency.
She received 18 months in federal prison.
* Broker John Flaherty’s premium-Ponzi dodge collapsed. The Troy, Mich. man purloined small amounts of
larger premiums that agents had paid him for coverage. He spent the money on expensive cars and clothing.
Flaherty even lived in a hotel for a year while paying his home mortgage. He kept the policies current by shuffling
premiums from 1 policy to the next. The plot collapsed when business slowed and he ran out of funds to move
money around. Flaherty was handed 14 months-20 years in prison. He also must repay his victims $1.3 million.
Ponzi
* Scott Purk might’ve gotten away with strangling his pregnant wife for life-insurance money 30 years ago
until his random blabbing made Ohio investigators suspicious. Margaret’s 1985 death first was ruled suicide by
hanging. She was found hanging by rope from a railing in their apartment. She was 8 months pregnant. The Akron-area man later was
questioned about suspected insurance arsons of 2 occupied homes. One was the couple’s own home, with their 2 children inside. He needed
the $150,000 insurance money for debts. He started rambling about Margaret’s death when being questioned about the fire involving his
home. Surprised investigators launched a probe that led to his recent murder conviction. Purk ended up with 28 years in prison for arson.
He strangled Margaret with a belt, then set up her seeming suicide for the life money. He’ll be sentenced next
week.
* Eight months pregnant and behind the wheel staging crashes. That’s the charge against a woman in
Sydney, Australia. Ghenoua Fadel placed a pillow between her unborn baby and the wheel then T-boned her
Toyota Rav 4 into a crony parked Nissan at high speed. The cohort had parked his car in the road, a stationary
target. Police found 2 heavily damaged vehicles and a dazed Fadel with stomach and back pains. She said she
missed a stop sign. Nearby security video caught Fadel red-handed. The insurers found 2 separate impacts rather
than the one she claimed. Fadel received 13 months of home detention.
Health Insurance Fraud Convictions
46 Months in Prison for New York Doc
Brett Halper of Glen Head, New York, A Long Island, New York, doctor has been sentenced to 46 months in
prison for his role in a bribery scheme involving a New Jersey lab.
A federal judge in Newark, New Jersey, sentenced Halper to 46 months in prison on November 18. The
41-year-old, who practiced in Rockville Centre, New York, had pleaded guilty to accepting bribes.
Halper was among more than three dozen people charged in the scheme run by Parsippany, New Jersey-based
Biodiagnostic Laboratory Services.
Halper admitted that from 2011 to 2013 he referred about $2.9 million worth of business to the lab, and was
often paid more than $5,000 per month.
The U.S. attorney’s office says the lab received more than $100 million from Medicare and private insurers.
Company president David Nicoll awaits sentencing on conspiracy and money laundering charges.
Doctor Sentenced to 72 Months for Multimillion-Dollar Fraud
Dr. Hicham A. Elhorr, 48, of Dearborn, Michigan, a Detroit-area physician who led and directed a multimillion-dollar Medicare fraud
scheme through his medical practice was sentenced November 19, 2015 to 72 months in prison.
Dr. Elhorr was sentenced by U.S. District Judge Nancy G. Edmunds of the Eastern District of
Michigan. In addition to imposing the prison term, Judge Edmunds ordered Elhorr to pay
$2,073,108.16 in restitution.
According to admissions in his plea agreement, from approximately August 2008 through
September 2012, Elhorr and his coconspirators fraudulently billed Medicare $4.2 million for
purported in-home physician services. Elhorr admitted that he employed unlicensed individuals
through his visiting physician practice, House Calls Physicians PLLC, who held themselves out
as licensed physicians and purported to provide physician home visits and other services to
Medicare beneficiaries in Michigan. The unlicensed individuals prepared medical documentation
that Elhorr and other licensed physicians signed as if they had performed the visits when, in fact, no licensed physicians had treated the
beneficiaries.
ZIFL can only wonder what took the Justice Department four years to detect this fraud that Dr. Elhorr was willing to admit.
Guilty of $80 Million Medicaid Fraud
Florence Bikundi, and her husband, Michael Bikundi, the owners of Global Healthcare, Inc., a home care agency, have been found
guilty by a jury of health care fraud, money laundering, and other charges stemming from a scheme in which they and others defrauded the
District of Columbia Medicaid program of over $80 million.
The verdicts were returned on November 12, 2015, and followed more than four weeks of trial in the U.S.
District Court for the District of Columbia. The Honorable Beryl A. Howell scheduled sentencing for Feb. 26,
2016. The charges carry statutory maximums of decades in prison. In addition to prison terms, Florence and
Michael Bikundi are subject to a forfeiture money judgment equal to the total proceeds they acquired as a result
of this scheme. Judge Howell also will determine if the Bikundis must forfeit $11 million seized from various
bank accounts, their home in Mitchellville, Md., and five luxury vehicles.
Guilty of $4.3 Million Mobile Diagnostic Fraud
Nita K. Patel, 53, and Kirtish N. Patel, 53, a Rockaway, New Jersey, husband and wife who owned a mobile diagnostic testing company
admitted receiving more than $4.3 million from Medicare and private insurance companies for diagnostic testing and reports that were
never interpreted by a licensed physician.
The Patels pleaded guilty November 17, 2015 before U.S. District Judge William H. Walls in Newark federal court to separate
informations charging them each with one count of health care fraud.
According to the documents filed in the case and statements made in Court:
From 2006 through June 2014, Nita and Kirtish Patel owned and operated Biosound Medical Services Inc. and Heart Solutions
(collectively, “Biosound”), of Parsippany, New Jersey, which were mobile diagnostic companies and approved Medicare providers. The
companies provided mobile diagnostic testing, including ultrasounds, echocardiograms and nerve conduction studies that were used to
diagnose heart defects, blood clots, abdominal aortic aneurysms and other serious medical conditions.
Biosound technicians would travel to the office of a primary care physician in the New York and New Jersey
area to conduct diagnostic testing. Biosound was responsible for sending the tests to a “reading physician” – an
appropriate specialist who would interpret the results. After the reading physician prepared a report, Biosound
was responsible for providing it to the referring physician. Biosound was paid millions of dollars by Medicare
and other payors for the diagnostic testing, the reading physician’s interpretation of the results and the reports.
Kirtish Patel admitted to, from October 2008 through June 2014, fraudulently interpreting and writing
diagnostic reports produced by Biosound despite having no medical license and knowing that the reports would
be used by the referring physicians to make important patient treatment decisions. Nita Patel admitted assisting
her husband in forging physician signatures on the fraudulently produced reports to make them appear
legitimate. Nita and Kirtish Patel also admitted falsely representing to Medicare that the neurological testing
performed by Biosound was being supervised by a licensed neurologist.
According to the informations, more than half of the diagnostic reports generated by Biosound between October 2008 and June 2014 were
never actually reviewed or interpreted by a physician. Nita and Kirtish Patel were paid more than $4,386,133.75 by Medicare and private
insurance companies for the fraudulent reports, which they used for personal expenses, including multiple residences and luxury vehicles.
The health care fraud charge to which Nita and Kirtish Patel pleaded guilty carries a maximum potential penalty of 10 years in prison and a
$250,000 fine, or twice the gross gain or loss from the offense. Sentencing for both defendants is scheduled for March 15, 2016.
84 Months in Prison For Health Care Fraud
Hussein Awada, 46, of Royal Oak, Michigan, a physician who practiced in Warren, Michigan, was sentenced to 84 months in prison
November 16, 2015, for writing prescriptions for oxycodone and other controlled medications without medical
justification, and for health care fraud.
Awada was sentenced by U.S. District Judge Nancy Edmunds.
From 2010 through early 2012, he conspired with James Lyons, a patient “marketer,” and others, to write
prescriptions for 80,000 oxycodone and Roxicodone, plus other controlled medications, in the names of people
who were brought to him by Lyons and other marketers, for no medical purpose. The marketers then bought the
pills from the “patients” and re-sold them to street dealers. Awada then used the patient data for the patients
brought to him by the marketers to submit bills to Medicare and Blue CrossBlue Shield for services that were
either never performed or were medically unjustified.Awada caused these same patiensto receive monthly
x-rays, and other invasive tests, which were medically unnecessary buthelped to concealhis fraud.Awada admitted that he defrauded
Medicare, Medicaid, and Blue Cross of about $2.3 million.
In addition to imprisonment, Awada was ordered to pay restitution to Blue Cross and Medicare in the total amount of $2.3million, and was
ordered to forfeit various assets and agree to pay the government $2.3 million.
Docs Agree to Pay $445,720 for Cheating Medicaid
Dr. Joshua Golden and Dr. Masoud Shahidi two Boston doctors have agreed to pay a combined $445,720 for allegedly charging cash for
opiate addiction treatment already covered by the state’s Medicaid program, illegally profiting off of hundreds of patients, Attorney General
Maura Healey announced today.
According to separate investigations by the AG’s Office, Dr. Golden and Dr. Shahidi allegedly required patients who were MassHealth
members to pay out-of-pocket fees in order to receive the drug Suboxone, when they were entitled to receive treatment for free. It is alleged
that each provider accepted MassHealth insurance except when a patient sought addiction treatment
using Suboxone. Under the terms of two assurances of discontinuance, filed in Suffolk Superior Court,
each physician has agreed to provide restitution and no longer charge members for covered services.
MassHealth providers are required by law to accept payments from MassHealth as payment in full for
services provided to its members. Suboxone, as well as other formulations of buprenorphine, is used
for the treatment of opioid addiction as it suppresses withdrawal and cravings for opioids.
Dr. Golden is a board-certified psychiatrist whose psychiatric practice is United Health Associates,
located in Sharon and Attleboro. Since July 2011, the AG’s Office alleges that Golden unlawfully
received at least $288,150 from MassHealth members seeking addiction treatment. The AG’s Office
alleges that Golden knowingly charged patients approximately $250 cash for an initial Suboxone
treatment visit and $100 for subsequent visits.
Under the terms of the settlement, Golden has agreed to pay a total of $363,150, including $288,150 in restitution to be distributed among
107 MassHealth members and a $75,000 penalty to be paid to the Commonwealth.
Shahidi, a board certified pediatrician, provides addiction treatment and primary care services at his Dedham practice, Dedham Family
Medical, P.C.
According to the AG’s Office, since August 2011, Shahidi knowingly charged more than 100 MassHealth members in excess of $95 in cash
for an initial Suboxone treatment visit and $95 in cash for each visit afterward, instead of submitting claims to MassHealth.
Under the terms of the settlement, Shahidi has agreed to pay a total of $57,570 in restitution to be distributed among 100 MassHealth
members. Shahidi will also pay a penalty of $25,000 to the Commonwealth.
Pharmacist to Spend 42 Months in Prison for $1.5 Million Fraud
Tamara Esponda, 48, a Miami-area pharmacy owner was sentenced today to 42 months in prison for her role
in the submission of more than $1.5 million in fraudulent claims to Medicare Part D.
Esponda pleaded guilty to one count of health care fraud on Aug. 7, 2015. In addition to imposing the prison
sentence, U.S. District Judge James I. Cohn of the Southern District of Florida ordered Esponda to pay
$1,583,976 in restitution.
Esponda owned Biomax Pharmacy Inc. According to admissions made in connection with Esponda’s guilty
plea, between October 2012 and September 2013, Biomax Pharmacy submitted fraudulent claims to Medicare
for prescription drugs that were not prescribed by physicians, not medically necessary and not provided to
Medicare beneficiaries. Esponda further admitted that in perpetrating this fraud she and her accomplices used
the beneficiaries’ and doctors’ Medicare identification numbers without their consent. During the course of the scheme, Biomax received
more than $1.5 million in payments from Medicare Part D, the prescription drug benefit, based on those false claims.
ZIFL can only wonder what took the Justice Department so long to catch this pharmacist until after she stole $1.583 million. Hopefully they
will seize some of her assets to get the money back but I will not hold my breath.
Two Plead Guilty in Tennessee for Defrauding Medicare
Dennis Sensing, 62, and Brenda Sensing, 45, both of New Albany, Mississippi pled guilty to partaking in a
scheme to defraud Medicare of more than $400,000 by making fraudulent medical equipment orders and paying
illegal kickbacks. Four defendants were previously indicted in the scheme — three in February 2015 and one in
October 2015.
According to evidence presented in court, Dennis Sensing, 62, and Brenda Sensing, 45, both of New Albany,
Mississippi partook in a lucrative health care and kickback fraud scheme between 2011 and 2013. The
conspiracy also involved another married couple, Sandra and Calvin Bailey, as well as their son, Bryan Bailey,
and accomplice, Cindy Mallard.
According to the charging documents, the Sensings operated the Adult and Children Medical Clinic in
Guntown, Mississippi while also working as salespersons for Jaspan Medical Systems, a durable medical
equipment company with an office in Jackson, Tennessee. Although Brenda Sensing was listed as a Jaspan employee paid via sales
commissions, the commissions paid to her were actually for sales by Dennis Sensing. Pay was arranged to go to Brenda Sensing to avoid
tax obligations incurred by her husband.
In their pleas, the Sensings admitted to paying illegal referral fees to Guntown, Mississippi residents, labeled “runners,” to identify
Medicare cardholders. Dennis Sensing would then market power wheelchairs and back braces to the cardholders. The Sensings also
admitted to forging medical records and signatures of a nurse practitioner on medical records to create the appearance that cardholders had
been evaluated by a medical provider for medical equipment when, in fact, no provider evaluated the cardholder. Some of the cardholders
had no need for the medical equipment.
In February 2015, Calvin Bailey, Sandra Bailey, and Mallard were indicted for conspiracy to commit health care fraud and to pay illegal
kickbacks in connection with health care services. Sandra Bailey was also indicted on multiple counts of health care fraud and paying
illegal kickbacks to health care providers and patient-referral sources.
In October 2015, the indictment was superseded to add the Baileys’ son, Bryan Bailey, as a fourth defendant, and name the Sensings as
persons involved in the conspiracy. Bryan Bailey was indicted for conspiracy to commit health care fraud and to pay illegal kickbacks in
connection with health care services. He was also charged with wire fraud.
On Thursday, the Sensings individually pled guilty before Chief Judge J. Daniel Breen to one count of conspiracy to commit health care
fraud and pay illegal kickbacks. The defendants face individual sentences of up to five years imprisonment and a fine of up to $250,000.
Both defendants are scheduled to be sentenced on February 11th at 10 a.m. before Chief Judge Breen.
Three Years Probation for Health Care Fraud
Gary Wannemacher, 50, of Orchard Park, NY, who was convicted of health care fraud, was sentenced to three years probation and 100
hours community by U.S. District Court Judge Elizabeth A. Wolford. In addition, the defendant was ordered to pay $57,373.86 in
restitution to Independent Health and Blue Cross Blue Shield of Western New York.
Assistant U.S. Attorney Elizabeth R. Moellering, who handled the case, stated the defendant is the owner of
Spring Creek Athletic Club in Springville, NY. Between January 2009 and December 31, 2012,
Wannemacher submitted fraudulent claims to private health insurance companies for reimbursement of health
programs offered at the athletic club that were not actually attended by the beneficiaries listed in the claims.
For instance, as part of the Silver Sneakers program, members of certain insurance companies could attend
programs at the athletic club for no charge. When members attended, the athletic club was allowed to submit a
claim for reimbursement to the insurance companies. The defendant submitted claims for reimbursement for programs not actually attended
by members including claims for individuals who were out of town on the date of the claim form or who had recently had major surgery and
did not attend the gym following the surgery. Wannemacher also submitted claims for reimbursement for programs supposedly attended by
two individuals after the dates of their deaths.
Other Insurance Fraud Convictions
Broker Keeps Premium & Gets 14 Months to 20 Years for Insurance Broker Racketeering
John Flaherty, 70, a Troy, Michigan, insurance broker was sentenced last week to 14 months to 20 years in prison on one count of
racketeering, the state attorney general’s office announced.
Michigan Attorney General Bill Schuette reported that Flaherty was also ordered to pay more than $1.3 million
in restitution to his victims.
The Michigan Department of Insurance and Financial Services (then known as the Office of Financial and
Insurance Regulation, or OFIR) found in 2008 that Flaherty, through his brokerage, Alternative Insurance
Services (AIS) had misappropriated more than $1.3 million in premium funds for his own personal use. The
AG’s office said Flaherty began skimming small amounts of insurance premium paid by local insurance agents
on behalf of their customers, rather than sending them to insurance companies, as far back as 1999.
OFIR revoked AIS’ license and ordered the agency to stop selling insurance in Michigan in 2008. In 2010, the
OFIR petitioned the court to have Flaherty abide by the terms of a restitution plan to which he had previously
agreed. The OFIR said he never complied with the consent order, under which he was to pay restitution of $1,329,086 to 18 insurers and
surplus lines general agents.
According to the AG’s office, Flaherty used the money to pay for expensive cars, clothing and even to live in a hotel for over a year, while
he was using additional premiums to pay the mortgage on a home he owned. Flaherty was able to cover the fraud for years by taking money
from other premiums to cover the money he stole. However, once his business slowed he was unable to continue covering the fraud.
Six Months for Workers’ Compensation Fraud
William Newell, owner of Bill Newell Excavating in Fairfield County, Ohio, pleaded guilty last week to a fifth-degree felony count of
workers comp fraud for falsifying his insurance coverage certificate to submit bid proposals. Newell, the owner of an excavating company
was sentenced to six months in prison and three years of monitoring for workers compensation fraud.
The Fairfield County Common Pleas Court sentenced him to six months in prison and three years of community
control, which includes paying the bureau $5,404.90 in restitution and an obligation to provide the court proof
of his premium payments, the statement says.
The Ohio Bureau of Workers’ Compensation’s Special Investigations Department began looking into Mr.
Newell after receiving a tip that he submitted an altered certificate of coverage for his business, according to the
statement. The investigation uncovered three additional false workers comp insurance coverage certificates that
Mr. Newell submitted in bid packets.
While Mr. Newell originally denied having any knowledge of the false certificates, he eventually admitted to creating and submitting them.
He also lied about only hiring subcontractors, not employees, to avoid paying workers comp premiums.
“Businesses in Ohio are required to maintain workers compensation coverage to protect their employees and care for them if injuries
occur,” bureau Administrator and CEO Steve Buehrer said in the statement. “Falsifying a coverage certificate is not only against the law,
it’s unfair to honest employers that are placed at a competitive disadvantage.”
California Agent Guilty of Insurance Fraud – Probation Only
Hesham Saleh Ibrahim, 57, of Palmdale, pleaded no contest on September 29 to felony insurance fraud and
was sentenced to three year felony probation, 30 days community labor and ordered to pay nearly $1,000 in
restitution and fines.
Ibrahim was charged in July 2015 with six misdemeanor counts of transacting insurance without a license for
issuing 114 auto insurance policies. He was also charged with one count of felony insurance fraud for issuing a
fraudulent insurance certificate for a $2 million commercial liability policy and pocketing the $350 premium.
Consumers should always make sure they receive a copy of the entire policy from the insurance company to
confirm their coverage. An insurance certificate is not enough.
The Department of Insurance Investigation Division began an investigation after receiving a complaint from a
consumer claiming they paid Ibrahim for liability insurance for their business, but did not receive a policy. Department investigators
discovered Ibrahim was transacting business on an expired agent license, operating under Five Star Insurance Agency and Convenience
Store. The department contacted Ibrahim and communicated that he was transacting business illegally and should stop immediately. He
continued to function as an agent, issuing 15 additional auto insurance policies after receiving the warning from the department
If It Seems Too Good To Be True, It Is
Robert B. Hahn, 64, a former insurance agent faces up to 20 years in federal prison operated after pleading guilty to wire fraud and money
laundering for representing a nonexistent group of doctors whom he claimed were raising funds for capital improvements and debt
retirement. The funding scam from January 2007 until February of this year, according to a statement from U.S. Attorney John M. Bales, of
the Eastern District of Texas. Hahn duped about 100 investors into believing the doctors’ group would pay annual interest rates of 20% on
their investments. Hahn then collected funds from these individuals and deposited them into his insurance business or personal checking
accounts, the release said.
In fact there was no doctors’ group. Hahn’s scheme reportedly raised as much as $5.4 million, and he
occasionally would issue “interest” payments, in cash, to investors to make the scheme appear real, the
statement said. He would also return principle loan or investment funds to individuals using checks drawn on
his insurance or personal checking accounts, using funds he had received from other investors, the statement
added.
Hahn reportedly issued about $4 million in the form of returned principle and interest or earnings. Hahn
admitted he simply made up this story to obtain and maintain funds for his personal use.
Some insurance agents and brokers forget that they are professionals who must ethically provide service to
their clients. Those who bought into the scheme, expecting 20% return on their money when banks paid less
than one percent were foolish to invest with Hahn and participated in his crime in a mini-Ponzi scheme.
California Insurance Agent Convicted of Abusing His Elderly Clients
Joseph Anthony Mele, 30, of Ventura pleaded no contest to multiple felony counts including grand theft by false pretenses, theft from an
elder and money laundering for ripping off two senior victims for $2 million in an annuity scam.
In a formal statement California Insurance Commissioner Dave Jones said: “Elder financial abuse is an egregious crime. Mele lined his
pockets with profits gained by violating his client’s trust and fiduciary responsibility as a licensed insurance
agent.”
The California Department of Insurance Investigation Bureau began a joint investigation with the Santa Barbara
Police Department in October 2014 after receiving notification of suspected elder abuse from the Santa Barbara
Financial Abuse Specialist Team and Adult Protective Services.
The investigation revealed that Joseph Anthony Mele acted as a financial planner for a 93-year-old woman and
convinced her to reinvest her existing retirement portfolio with him. In June 2007, he sold her $1,154,268 in
long-term annuities. Over the course of seven years, Mele twisted and churned these annuities, a deceptive practice of rewriting annuities in
order to obtain additional commissions under the guise of providing better returns. Mele earned $295,965 in commissions and caused the
victim to lose more than $500,000 in surrender penalties.
In addition, Mele wrote himself $800,000 in unauthorized checks from the victim’s checking account so he could invest the funds for her.
Bank records revealed this money was never remitted to an insurance company but used for personal expenses including entertainment,
travel and gambling.
Department investigators also uncovered a second victim, a 74-year-old woman who lost $80,000 in surrender penalties, lost premium and
interest, and suffered additional tax liability after Mele convinced her to surrender her annuities early.
Department investigators were able to get some insurers to refund surrender penalties for victims, once Mele’s scam was revealed.
The department has taken legal action to permanently revoke Mele’s insurance license. The Santa Barbara County District Attorney’s
Office is prosecuting this case. Mele faces up to 30 years in prison, restitution of more than $800,000 and fines of $1.6 million when he is
sentenced on January 4, 2016 in Santa Barbara Superior Court.
Five Years for Arson-for-Profit Attempt
Tashima K. Gantt, 42, and Mark Lewis, 49, pleaded guilty to first-degree arson and
insurance fraud on November 19, 2015, in Richmond County Superior Court, Georgia.
Gantt, who had no felony record, was sentenced to five years probation under the First
Offender Act. Lewis, who has a long history of property crimes, was sentenced to five years in
prison followed by five years probation.
Lewis’ suggestion to be returned to a rehab program another judge had sent him to didn’t
impress Judge J. Wade Padgett. If it had worked, he wouldn’t be back in court, Padgett told
Lewis. Padgett also revoked the remainder of two probation sentences Lewis was serving. He
has an additional 18 months to serve for the revocation.
Four days before firefighters responded to a fire at 1811 Tubman Home Road, Lewis put the
house in Gantt’s name. The insurance premiums were paid by Lewis’ mother, said Assistant
Gantt & Lewis
District Attorney Robert Homlar. Before the insurance company paid more than $500 to help
Gantt get back on her feet, the fire was ruled as arson, Homlar said. It was started by a space heater placed next to a mattress.
According to the city’s property records, the home was valued at $24,160. Lewis bought the house in 2011 for $13,000.
Three Years for $10 Million Premium Theft by Broker
Bonney Hebert, a former insurance broker, was sentenced to three years in federal prison after pleading guilty to charges related to the
theft of $10 million in health insurance premiums from Aetna Life Insurance Co.
As the owner of Academic Risk Resources and Insurance LLC., Hebert, 60, was supposed to forward health
insurance premiums paid by the state university of New Jersey, Rutgers University, to Aetna. Between 2009
and 2012, she instead kept $10,358,728 and used it to pay personal and business expenses.
Prosecutors said she was the sole owner at the time of Academic Risk, a Boston-based risk management and
insurance brokerage agency.
Hebert, a Killington, Vermont, resident, was sentenced by U.S. District Judge Alfred Covello on November 18,
2015. After serving her term, she is to spend three years on supervised release.
Herbert admitted the wrongdoing to Aetna in 2012 and later sold her business, sending sale proceeds of about $1.59 million directly to
Aetna, said prosecutors. She also returned to the insurer about $900,000 in commissions earned as part of the contract. However,
prosecutors said, she still owes Aetna $7,846,305 in restitution.
Guilty of $5.3 Million Insurance Fraud
Roland Edward Steed, the former Discovery Insurance executive pleaded guilty November 16, 2015 to four felony counts related to an
elaborate insurance fraud scam perpetrated by him and four others over a period of at least seven years and involving
around $5.3 million.
Co-conspirators alleged in statements the crimes, discovered in late 2011, possibly dated back to the mid-1990s.
Discovery Insurance owner and CEO Stephen Hill that Steed’s 19 years with Discovery that he joined the firm with
the express intent of defrauding it. Cassie Stallings, Discovery assistant vice president, said she put considerable
faith in Steed and looked up to him as a father figure. She also found the check that led to the entire unraveling of the
conspiracy.
Because of a Medicare reconciliation law that’s part of the Affordable Care Act — popularly known as Obamacare
— Stallings discovered a check made out to an individual, but cashed by Signal Claims Service. Further investigation
led to the revelation of co-conspirator Marvin Lyle Quinn as the person controlling the Signal account.
Steed
Hill, who became a co-owner of the business with other family members in the early ‘90s, said they brought on Steed to build the auto
claims side of the business virtually from the ground up. Hill said if it wasn’t for his wealth generated by other businesses, Discovery
would’ve gone out of business because of money it continued to lose as claims outstripped payments.
In a deal with prosecutors, Steed, 71, avoided the full set of charges against him. Those were 20 felony counts of conspiracy and seven
felony counts each of obtaining property under false pretense, embezzlement, corporate malfeasance and larceny by employee.
Four Years in Prison for Insurance Fraud
Lisa Ephrem, a Portland, Oregon car dealer who reportedly enjoyed the “adrenalin rush” of bilking insurance companies out of bogus
life-insurance payouts was sentenced November 5, 2015 to more than four years in prison.
U.S. District Judge Michael W. Mosman described 40-year-old crimes as a lot of lies to a lot of people, a free-rein fraud that made off with
$200,000 from LifeMap and The Standard Insurance Co.
Government prosecutor Helen L. Cooper characterized Ephrem as a “very, very smart” crook who once convinced a credit card company
that she was the owner of a jewelry store in Seattle and that it should send money from its sales to her account – and for a few months they
did. Ephrem’s latest crime began in early 2011, when she took out a pair of group life insurance policies for Carr City, her Happy Valley
automotive company. Ephrem submitted fraudulent life insurance claims for six people, including a few
relatives, none of whom actually
Olson noted that his client has served previous stretches behind bars (for the jewelry store fraud). But prison
time has not deterred Ephrem, he explained. What she needs is professional counseling. “Folks in the Gypsy
culture – the Roma culture – do not go for help,” her lawyer said. “The closest thing they have is a fortune
teller.”
The judge, in deciding Ephrem’s punishment, he considered a contest of two great principles: that people
should be judged as individuals – not by race, gender or other human divisions; and the other was that those
people’s personal histories could lessen the impact of their crimes. Committing such crimes as a 15-year-old
girl would have been one thing, but “You’re a grown woman” he said when he sentenced her to more than four
years in prison.
Three Long Island Men Plead Guilty on Federal Charges in Sullivan County Arson
Nicholas Motta, 59, and Dominic Motta, 43, both of Islandia, and Anthony Perso, plotted to set fire to the former Kilcoin’s bar owned
by the Mottas with the goal of obtaining more than $100,000 in insurance proceeds.
Three Long Island residents pled guilty in White Plains federal court on charges in connection with a fire set at a bar in Swan Lake. The
Mottas pled guilty on Tuesday to attempted mail fraud in the insurance fraud scheme. Perso, 32, of Medford, New York, and Perso pled
guilty to attempted mail fraud.
The three traveled in the early morning hours of February 10, 2010 during a blizzard, to the bar to set it on fire. The insurance company
detected the arson and ultimately denied Dominic Motta’s claim when he repeatedly failed to respond to requests from the insurance
company that he answer questions about the fire under oath.
One Year, Four Months in Prison for $2 Million Fraud & Tax Scheme
Rand Robert Gordon, 61 of Laguna Hills, California man was sentenced in Orange County Superior Court on
November 13, 2015 to a year and four months in prison for owing nearly $2 million in a tax evasion and fraud
scheme.
In February, Gordon pleaded guilty to a laundry list of felony counts that includes misrepresenting facts to the
State Compensation Insurance Fund, which provides workers’ compensation insurance, filing a false tax return,
willful failure to file or make a fraudulent tax return, making false statements, making false statements to
discourage an injured worker from claiming benefits, failing to file a return with intent to evade tax, failure to
pay taxes, and an enhancement for white collar crime of more than $500,000, according to court records.
He has paid $385,000 in restitution.
Gordon’s wife, Michele Louise Gordon, 62, was sentenced in February to three years probation for her part in the scheme. She was also
ordered to pay a $5,000 fine and $464,560 in restitution.
The couple owned moving companies under various names, including Gordon Moving Services Inc., Gordon Moving and Storage Inc,
GMS Solutions.
From 2006 to 2010, Rand Gordon under-reported insurance premiums to the State Compensation Insurance Fund and taxes intended to go
to the state Employment Development Department. Fake tax returns were filed and false information was given to the California Franchise
Tax Board.
The extra money was used as personal income instead.
The couple owed $875,000 to the State Compensation Insurance Fund, 878,905 to the EDD and $649,730 to the
Franchise Tax Board.
After obtaining an insurance policy for his company through the State Compensation Insurance Fund in October
2006, Gordon failed to make quarterly payments, which led to the policy being canceled in January 2009, the
DA’s Office said. The policy was renewed two months later.
Gordon then made false statements by under-reporting his payroll and failing to pay taxes to the EDD on each of
the policies.
On Jan. 9, 2008, Gordon was driving an employee to a hospital as a result of a work-related injury when he told
the worker to lie about how it occurred.
On Sept. 3 that same year, Gordon discouraged another worker from filing a compensation claim so he could
keep his insurance premium low. The worker filed the claim anyway. When the State Compensation Insurance
Fund officials reviewed the claim, they discovered the potential fraud.
In addition to the prison sentence, Gordon was order to pay $2 million in a civil judgment.
Zalma Insurance Consultants provides the following services to its clients:
•
Acting as a consultant or expert witness on behalf of
insurers and insureds in litigation.
•
Consultation with insurance claims personnel on methods
to avoid charges of bad faith.
•
Acting as a consultant to the insured in the presentation of
a first party claim.
•
•
Analysis of claims file material to allow the party to
present evidence to establish and document bad faith or
the existence of a genuine dispute between the insurer and
insured.
Consultation with insurers and insureds on insurer
compliance with Fair Claims Practices laws and
regulations.
•
Training on insurance and insurance law for all insurer
•
Acting as a mediator to help resolve insurance claims short
of litigation.
•
Analysis of insurance policy wording.
•
Litigation advice to defense or plaintiffs’ counsel.
•
Review of policy wording and claims files to determine if
there is a basis for payment or denial of a claim.
•
Analysis of insurance litigation for the insurer and the
insured.
Consultation from Zalma Insurance Consultants can save you or your client thousands of dollars in the defense or prosecution of an
insurance dispute. Zalma Insurance Consultants will find a solution to your insurance claims dispute that is fair, intelligent, beneficial and
Economical.
If you only need an opinion letter I will review your entire claim file and policy wording and prepare a coverage opinion letter for the flat
fee of $4,000.00. Otherwise, my services are billed at $500.00 per hour, portal to portal.
Zalma Insurance Consultants provides expert advice to counsel for insurers and plaintiffs’ counsel. Advice from Zalma Insurance
Consultants is indispensable to the resolution of insurance disputes. Consultation from Zalma Insurance Consultants can save you, your
counsel or client hundreds of hours of investigative and legal work. Call Barry Zalma at 310-390-4455 or e-mail at [email protected].
Zalma’s Insurance Fraud Letter
© 2015 by Barry Zalma & ClaimSchool, Inc.
4441 Sepulveda Blvd, CULVER CITY CA 90230-4847
http://www.zalma.com # [email protected] # http://zalma.com/blog
ZIFL is made available by the publisher for educational purposes only as well as to give you general information and a general
understanding of the law, not to provide specific legal advice. By using ZIFL you understand that there is no attorney client relationship
between you and the publisher. ZIFL should not be used as a substitute for competent legal advice from a licensed professional attorney in
your state.
Books from the American Bar Association
The Insurance Fraud Deskbook
Barry Zalma, Esq., CFE, 2014 Paperback, 638 Pages, 7x10
The Insurance Fraud Deskbook is a valuable resource, peer reviewed by the American Bar
Association, for those who are engaged in the effort to reduce expensive and pervasive occurrences
of insurance fraud. It explains the elements of the crime and the tort to claims personnel, and it
provides information for lawyers who represent insurers so they can adequately advise their clients.
Prosecutors and their investigators can use this book to determine what is required to prove the crime
and win their case.
The full text of decisions from courts of appeal and supreme courts across the country are provided
so the reader can understand what happens after the investigation is completed and can apply that
information to undertake their own thorough investigations. It allow claims personnel and their
lawyers to understand what errors would cause a defect or a not-guilty verdict.
The effort to reduce insurance fraud requires the assistance of both civil and criminal courts. The Insurance Fraud Deskbook can help the
prudent fraud investigator, insurance adjuster, insurance attorney, insurance Special Investigation Unit and insurance company management
to attain the information needed to deal with state investigators and prosecutor.
Available from the American Bar Association at:
http://shop.americanbar.org/eBus/Default.aspx?TabID=251&productId=214624; or [email protected], or 800-285-2221.
Diminution in Value Damages
How to Determine the Proper Measure of Damage to Real and Personal Property
This book was written to provide sufficient information to those who became interested in the issue since the Georgia Supreme Court
decided State Farm Mutual Automobile Insurance Co. v. Mabry, 274 Ga. 498, 556 S.E.2d 114 (Ga. 11/28/2001) and includes cases dealing
with the use of diminution in value as a method of determining the amount of loss incurred by a plaintiff seeking indemnity for damage to
real or personal property.
Because confusion has reigned across the United States concerning the proper measure of damages for property damage to property that has
been repaired, Diminution In Value Damages assists the reader in answering the questions concerning the proper measure of damage in
each of the fifty United States and federal United States jurisdictions
This edition has been totally rewritten and expanded, providing the most extensive and detailed coverage of the issue and a thorough
explanation of how to apply diminution in value damages to losses to property.
ISBN: 978-1-63425-295-8, Product Code: 5190524, 2015, 235 pages, 7 x 10, Paperback
Available at http://shop.americanbar.org/eBus/Store/ProductDetails.aspx?productId=203226972
Zalma’s Insurance 101
Zalma Insurance Consultants and ClaimSchool Inc. have launched “Zalma’s Insurance 101,” a new online resource that
provides video-based insurance training on http://www.zalma.com/videoblog/. Each educational video, which is about three
minutes each, offers free commentaries on insurance, insurance claims handling, and insurance coverage.
Designed for people in the insurance business, whether they are working as an insurance agent, insurance broker, insurance
claims person or insurance lawyer, the video series teaches the basics and beyond. It starts with a definition of insurance,
moves through methods to read and understand an insurance policy, and continues on to deal with the claim and use of
investigative techniques.
Said Zalma, “It is my intent in creating these videos to provide anyone interested in insurance a means to painlessly learn
everything there is to know about property and casualty insurance in three-minute increments. If you start at Video Volume 1
and watch a new video every day, three minutes a day, five days a week, you will have 12.5 hours of insurance education at
the end of a year.”
As readers of ZIFL are aware, Barry Zalma is an insurance coverage consultant and expert witness. Mr. Zalma limits his
practice to issues involving coverage matters, providing consultation to insurers, those in the business of insurance, policyholders
and their counsel. Mr. Zalma has qualified as an expert in various state and federal courts across the U.S. and as far away as the
British Cayman Islands.
The comments made in each issue of ZIFL are for information only and are not intended as legal advice. If you need legal
advice, contact a local attorney. If you need an insurance claims handling, insurance coverage or insurance bad faith consultant
and expert testimony contact Mr. Zalma at Zalma Insurance Consultants, 310-390-4455 or e-mail to [email protected].

Zalma`s Insurance Fraud Letter

Transcription

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