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Insurance Claims professional presents articles and videos on insurance, insurance Claims and insurance law for insurance Claims adjusters, insurance professionals and insurance lawyers who wish to improve their skills and knowledge. Presented by an internationally recognized expert and author.
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March 25, 2022
Lawyers Claim for Indemnification Under Retainer Agreement Must be Arbitrated

When Liability Insurance is Exhausted Arbitration Agreement Controls Duty to Arbitrate

Read the full article at https://www.linkedin.com/pulse/when-liability-insurance-exhausted-arbitration-duty-zalma-esq-cfe and at https://zalma.com/blog plus more than 4100 posts.

AT&T Services, Inc. (“AT&T”) moved the USDC to compel arbitration, pursuant to the Federal Arbitration Act. In Lonstein Law Office, P.C., Julie Lonstein, Wayne D. Lonstein v. Evanston Insurance Company, Markel Service Incorporated, AT&T Services, Inc., No. 20-cv-9712 (LJL), United States District Court, S.D. New York (January 6, 2022) the USDC resolved the dispute.
BACKGROUND

Plaintiff Lonstein Law Office, P.C. (“LLO” and together with Julie and Wayne Lonstein (“Plaintiffs”)) is a law firm located in Ellenville, New York. Julie C. Lonstein and Wayne D. Lonstein are the principals of LLO. AT&T is the successor-in-interest to DirecTV, Inc. The complaint defines AT&T, as successor-in-interest to DirectTV, Inc., as “DIRECTV,” and the allegations of the complaint recited herein use the same definition unless otherwise noted.
The Relationship Between LLO and DIRECTTV/AT&T

Beginning in 2006, LLO was retained by DIRECTV to identify, investigate, and bring claims and/or civil actions against businesses or individuals throughout the United States who illegally acquired DIRECTV services, either by acquiring it without payment or by misrepresenting that they were individuals when in fact the services were actually being received and exhibited in a commercial establishment. LLO's agreement to provide these services to DIRECTV was documented in a retainer agreement (the “Retainer Agreement”) between LLO and DIRECTV dated on or about October 2, 2009. Pursuant to the Retainer Agreement, DIRECTV retained LLO to represent it “in the investigation and litigation of claims against individuals and entities for the commercial misuse and unauthorized exhibition of DIRECTV satellite programming services” in exchange for a contingency fee.

The parties agreed that they would share equally the costs of auditing and investigation fees incurred in the documentation of fraud, misuse, and/or piracy through the efforts of an outside firm, Signal Auditing, Inc., and that LLO could pay DIRECTV's share from client funds it was permitted to hold in trust. LLO was required to obtain DIRECTV's approval on a case-by-case basis prior to filing any lawsuit and was further required to maintain professional liability coverage with minimum limits of $1 million “per occurrence, ” DIRECTV represented to LLO that it had “the rights upon which it is basing its claims of infringement, misuse or piracy.”

In addition, the Retainer Agreement has a mutual indemnification provision. As a result of the actions of LLO in accordance with the Retainer Agreement multiple suits were filed against LLO and DIRECTV. The Retainer Agreement was terminable by either party, with or without cause, on 14-days prior notice to the other party. It is signed by Julie C. Lonstein on behalf of LLO.

On or about February 15, 2019, Plaintiffs entered into a wind-down agreement (the “Wind Down Agreement”) with AT&T, as successor to DIRECTV. The Wind Down Agreement recognized that AT&T retained LLO over the past twelve years and stated that the program was being discontinued. For a one-time non-refundable payment from AT&T, LLO agreed to continue to represent AT&T during a one-year period following the effective date of the Wind Down Agreement. The Wind Down Agreement stated that it superseded all prior agreements between the parties.

Section 5.01 of the Wind Down Agreement contains a mutual release by the parties of claims that they might have against one or another. The Wind Down Agreement also contains a broad arbitration clause. The Wind Down Agreement was signed on February 15, 2019 by Wayne D. Lonstein and Julie C. Lonstein individually and on behalf of LLO, and it was signed on February 19, 2019 by AT&T.
The Lawsuits Against DIRECTV and LLO

During the term of the Retainer Agreement, Plaintiffs were named, sometimes alongside DIRECTV, in four lawsuits relating to the actions by Plaintiffs and DIRECTV in asserting its rights against the plaintiffs in the four lawsuits.
THE PROBLEM CAUSED BY INSUFFICIENT LIMITS ON E&O POLICY
The Insurance Dispute - Multiple Suits a Single Occurence

Plaintiffs are parties to Insurance Policy No. LA806580 with Evanston Insurance Company (“EIC”) providing professional malpractice coverage for the claims period June 1, 2013 to June 1, 2014 (the “Policy”). The Policy provides coverage of $1 million per occurrence less a deductible subject to an aggregate limit of liability of $3 million.

Plaintiffs tendered and timely provided written notice of the Actions to EIC, which then provided for Plaintiff's legal representation in the Actions. By letter dated July 31, 2020, however, EIC notified Plaintiffs that the Policy limit of $1 million was exceeded by the payment of legal fees and/or expenses and that Evanston's obligations pursuant to the Policy had expired (the “July 31, 2020 Letter”). The July 31, 2020 Letter asserted “that each of the Actions ar[ose] out of a series of related Wrongful Actions” and that, as a result, “the Actions should be treated as a single claim/occurrence as defined in the Policy, ” subject to the $1 million limits of liability. Pursuant to the July 31, 2020 Letter, EIC refused to pay invoices from Lewis Brisbois in the amount of $42,153.05. Lewis Brisbois also has remitted to Plaintiffs invoices for an additional $59,604.30 for defense costs and it is claiming the approximate sum of $200,000 remains due and outstanding in connection with its representation of LLO in the Actions.

Plaintiffs seek indemnification from DIRECTV in the Actions since the insurance is exhausted. They allege that have demanded that DIRECTV indemnify and defend Plaintiffs, but that DIRECTV has nonetheless refused to do so.

Plaintiffs bring claims for breach of contract and breach of good faith and fair dealing and seek a judgment declaring that DIRECTV is obligated to defend and indemnify Plaintiffs against the claims that are asserted in the Actions as well as an order of specific performance against DIRECTV.
DISCUSSION

The Court's role on a motion to compel arbitration is narrow. Plaintiffs do not dispute that there is a valid arbitration agreement between LLO and AT&T. They affirmatively allege that they entered into the Wind Down Agreement with AT&T, which contains a broad arbitration provision. They do not identify any generally applicable contract defenses, such as fraud, duress, or unconscionability, that could invalidate the arbitration agreement.

The arbitration clause in the Wind Down Agreement vests in the arbitration panel in the first instance the decision whether any particular dispute falls within that clause and should be subject to arbitration.

First, since there is a valid and enforceable arbitration agreement between the parties and since the parties agreed that the arbitrator-and not a court-would decide the scope of that provision, Plaintiffs are making their argument in the wrong tribunal. Having made that bargain, Plaintiffs must convince the arbitrators, and not this Court, that the dispute should not be arbitrated.

AT&T has moved for a stay and Plaintiffs do not oppose a stay. Accordingly, the Court will stay this matter until the arbitration is completed.
ZALMA OPINION

Lawyers errors and omissions insurance invariably contain a burning limits clause that requires the limit of liability to be reduced as investigation and defense costs are incurred. LLO only acquired a $1 million limit which was exhausted by its defense counsel without resolution. LLO then sought indemnity from AT&T in accordance with their retainer agreement only to find that the Wind Down Agreement's arbitration clause eliminated the right to litigate the indemnity provision and found they must submit to arbitration not to the USDC.

(c) 2022 Barry Zalma & ClaimSchool, Inc.

Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 54 years in the insurance business. He is available at http://www.zalma.com and [email protected].

Over the last 54 years Barry Zalma has dedicated his life to insurance, insurance claims and the need to defeat insurance fraud. He has created a library of books and other materials to make it possible for insurers and their claims staff to become insurance claims professionals.

Subscribe to Zalma on Insurance at locals.com https://zalmaoninsurance.local.com/subscribe. Subscribe to Excellence in Claims Handling at https://barryzalma.substack.com/welcome. Write to Mr. Zalma at [email protected]; http://www.zalma.com; http://zalma.com/blog; I publish daily articles at https://zalma.substack.com.

Go to the podcast Zalma On Insurance at https://anchor.fm/barry-zalma; Follow Mr. Zalma on Twitter at https://twitter.com/bzalma; Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921; Go to Barry Zalma on YouTube- https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg; Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library/ Read posts from Barry Zalma at Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library/

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20 hours ago
Allegations That Establish Breach of a Condition Defeats Suit

Notice of Claim Later than 60 Days After Expiration is Too Late

Post 5089

Injury at Massage Causes Suit Against Therapist

Read the full article at https://lnkd.in/gziRzFV8, see the full video at https://lnkd.in/gF4aYrQ2 and at https://lnkd.in/gqShuGs9, and at https://zalma.com/blog plus more than 5050 posts.

Hiscox Insurance Company (“Hiscox”) moved the USDC to Dismiss a suit for failure to state a claim because the insured reported its claim more than 60 days after expiration of the policy.

In Mluxe Williamsburg, LLC v. Hiscox Insurance Company, Inc., et al., No. 4:25-cv-00002, United States District Court, E.D. Missouri, Eastern Division (May 22, 2025) the trial court’s judgment was affirmed.

FACTUAL BACKGROUND

Plaintiff, the operator of a massage spa franchise, entered into a commercial insurance agreement with Hiscox that provided liability insurance coverage from July 25, 2019, to July 25, 2020. On or about June 03, 2019, a customer alleged that one of Plaintiff’s employees engaged in tortious ...

00:08:31
June 02, 2025
Zalma’s Insurance Fraud Letter – June 1, 2025

ZIFL – Volume 29, Issue 11
The Source for the Insurance Fraud Professional
Posted on June 2, 2025 by Barry Zalma

Post 5087

See the full video at and at

Read the full article and the full issue of ZIFL June 1, 2025 at https://zalma.com/blog/wp-content/uploads/2025/05/ZIFL-06-01-2025.pdf

Zalma’s Insurance Fraud Letter – June 1, 2025

See the full video at https://lnkd.in/gw-Hgww9 and at https://lnkd.in/gF8QAq4d, and at https://zalma.com/blog plus more than 5050 posts.

ZIFL – Volume 29, Issue 11

The Source for the Insurance Fraud Professional

Read the full article and the full issue of ZIFL June 1, 2025 at https://lnkd.in/gTWZUnnF

Zalma’s Insurance Fraud Letter (ZIFL) continues its 29th 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 ...

00:08:42
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May 30, 2025
Plain Language of Policy Enforced

No Coverage if Home Vacant for More Than 60 Days

Failure to Respond To Counterclaim is an Admission of All Allegations

Post 5085

See the full video at https://lnkd.in/gbWPjHub and at https://lnkd.in/gZ9ztA-P, and at https://zalma.com/blog plus more than 5050 posts.

In Nationwide Mutual Insurance Company v. Rebecca Massey, Civil Action No. 2:25-cv-00124, United States District Court, S.D. West Virginia, Charleston Division (May 22, 2025) Defendant Nationwide Mutual Insurance Company's (“Nationwide”) motion for Default Judgment against Plaintiff Rebecca Massey (“Plaintiff”) for failure to respond to a counterclaim and because the claim was excluded by the policy.

BACKGROUND

On February 26, 2022, Plaintiff's home was destroyed by a fire. At the time of this accident, Plaintiff had a home insurance policy with Nationwide. Plaintiff reported the fire loss to Nationwide, which refused to pay for the damages under the policy because the home had been vacant for more than 60 days.

Plaintiff filed suit ...

00:06:50
May 15, 2025
Zalma's Insurance Fraud Letter - May 15, 2025

ZIFL Volume 29, Issue 10
The Source for the Insurance Fraud Professional

See the full video at https://lnkd.in/gK_P4-BK and at https://lnkd.in/g2Q7BHBu, and at https://zalma.com/blog and at https://lnkd.in/gjyMWHff.

Zalma’s Insurance Fraud Letter (ZIFL) continues its 29th 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/ You can read the full issue of the May 15, 2025 issue at http://zalma.com/blog/wp-content/uploads/2025/05/ZIFL-05-15-2025.pdf
This issue contains the following articles about insurance fraud:

Health Care Fraud Trial Results in Murder for Hire of Witness

To Avoid Conviction for Insurance Fraud Defendants Murder Witness

In United States of America v. Louis Age, Jr.; Stanton Guillory; Louis Age, III; Ronald Wilson, Jr., No. 22-30656, United States Court of Appeals, Fifth Circuit (April 25, 2025) the Fifth Circuit dealt with the ...

May 15, 2025
CGL Is Not a Medical Malpractice Policy

Professional Health Care Services Exclusion Effective

Post 5073

See the full video at https://lnkd.in/g-f6Tjm5 and at https://lnkd.in/gx3agRzi, and at https://zalma.com/blog plus more than 5050 posts.

This opinion is the recommendation of a Magistrate Judge to the District Court Judge and involves Travelers Casualty Insurance Company and its duty to defend the New Mexico Bone and Joint Institute (NMBJI) and its physicians in a medical negligence lawsuit brought by Tervon Dorsey.

In Travelers Casualty Insurance Company Of America v. New Mexico Bone And Joint Institute, P.C.; American Foundation Of Lower Extremity Surgery And Research, Inc., a New Mexico Corporation; Riley Rampton, DPM; Loren K. Spencer, DPM; Tervon Dorsey, individually; Kimberly Dorsey, individually; and Kate Ferlic as Guardian Ad Litem for K.D. and J.D., minors, No. 2:24-cv-0027 MV/DLM, United States District Court, D. New Mexico (May 8, 2025) the Magistrate Judge Recommended:

Insurance Coverage Dispute:

Travelers issued a Commercial General Liability ...

April 30, 2025
The Devil’s in The Details

A Heads I Win, Tails You Lose Story
Post 5062

Posted on April 30, 2025 by Barry Zalma

"This is a Fictionalized True Crime Story of Insurance Fraud that explains why Insurance Fraud is a “Heads I Win, Tails You Lose” situation for Insurers. The story is designed to help everyone to Understand How Insurance Fraud in America is Costing Everyone who Buys Insurance Thousands of Dollars Every year and Why Insurance Fraud is Safer and More Profitable for the ­­­Perpetrators than any Other Crime."

Immigrant Criminals Attempt to Profit From Insurance Fraud

People who commit insurance fraud as a profession do so because it is easy. It requires no capital investment. The risk is low and the profits are high. The ease with which large amounts of money can be made from insurance fraud removes whatever moral hesitation might stop the perpetrator from committing the crime.

The temptation to do everything outside the law was the downfall of the brothers Karamazov. The brothers had escaped prison in the old Soviet Union by immigrating to the United...

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