Louie the Switch
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Posted on April 6, 2022 by Barry Zalma
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Barry Zalma, Esq., CFE presents videos so you can learn how insurance fraud is perpetrated and what is necessary to deter or defeat insurance fraud.
Louie made his living buying and selling used cars in Salt Lake City. He would attend a dealer’s auction and buy a slightly damaged vehicle, take it to a shop, clean it up, paint it and sell it to downtown dealers.
Fifty cars would go through Louie’s hands every month. He made a relatively good living clearing between $500 and $2,000 on each transaction. Louie was greedy. The Switch had no moral character. Louie was dishonest. If he could make an extra $1000 on a sale by turning back the odometer 10,000 miles, he turned it back. If he could sell a car for an extra $1000 by rubbing grease on the seams where the repairs from an accident had been done, he crawled under the car and spread the grease.
Everyone liked Louie. He was a friendly sort. Louie had no trouble making friends. Everyone at the auto auction knew him. Louie was a professional. He only bought used cars that he could make look good and sell. He never bought bad cars. The Switch always paid for his purchases in cash.
If Louie had a weakness, it was skiing. Every winter he would drive from Salt Lake to the mountains of Utah and ski. He owned a condo in Park City which he used when he did not have a tenant for the condo.
A FRAUD IS BORN
What he saw as the need for the dream cabin drove Louie to crime. One of his acquaintances, a tow truck operator, told him that a lien sale for storage charges was about to happen on a four-wheel drive crew cab Chevy pickup that Louie could buy for $250. The pickup had been declared a total loss by the insurance company after it was driven head-on into a sixteen wheeler while going the wrong way on the interstate. Louie already had in his inventory a four-wheel drive Chevy crew cab. His mind began to spin with devious criminal thoughts.
THE FRAUD FAILS
The insurance company investigator was ready to pay Louie the full stated value on the policy until he received a declaration of total auto theft from Louie. Louie represented in the declaration that the truck had an automatic transmission and a gasoline engine. The investigator knew, from his experience with vehicle identification numbers, that the VIN number identified this truck as having a five-speed standard transmission and a diesel engine. He was confused.
The investigator then searched the National Insurance Crime Bureau (NICB) computer for information on the vehicle. The computer informed the investigator that the vehicle had been in a major automobile accident only thirty (30) days before Louie insured it. The vehicle had been declared a total loss by its insurer. NICB obtained a copy of the prior insurer’s file, including photographs showing the total destruction of the vehicle.
Luck, a knowledgeable adjuster, the massive database maintained by the National Insurance Crime Bureau and the resourcefulness of DMV investigators stopped an almost perfect crime.
When news of Louie’s arrest, conviction and sentence reached the auto market reported thefts in the Salt Lake City area dropped 10% for the next six months.
ZALMA OPINION
Although insurance fraud seems an easy and safe crime to pursue it is still a crime and failure to effectively pursue a fraudulent claim can result in prison. This case explained to the public that fraud is not worth the effort when it can result in jail.
(c) 2022 Barry Zalma & ClaimSchool, Inc.
Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 54 years in the insurance business. He is available at http://www.zalma.com and [email protected].
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Jury’s Findings Interpreting Insurance Contract Affirmed
Post 5105
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Madelaine Chocolate Novelties, Inc. (“Madelaine Chocolate”) appealed the district court’s judgment following a jury verdict in favor of Great Northern Insurance Company (“Great Northern”) concerning storm-surge damage caused by “Superstorm Sandy” to Madelaine Chocolate’s production facilities.
In Madelaine Chocolate Novelties, Inc., d.b.a. The Madelaine Chocolate Company v. Great Northern Insurance Company, No. 23-212, United States Court of Appeals, Second Circuit (June 20, 2025) affirmed the trial court ruling in favor of the insurer.
BACKGROUND
Great Northern refused to pay the full claim amount and paid Madelaine Chocolate only about $4 million. In disclaiming coverage, Great Northern invoked the Policy’s flood-exclusion provision, which excludes, in relevant part, “loss or damage caused by ....
Failure to Name a Party as an Additional Insured Defeats Claim
Post 5104
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Contract Interpretation is Based on the Clear and Unambiguous Language of the Policy
In Associated Industries Insurance Company, Inc. v. Sentinel Insurance Company, Ltd., No. 23-CV-10400 (MMG), United States District Court, S.D. New York (June 16, 2025) an insurance coverage dispute arising from a personal injury action in New York State Supreme Court.
The underlying action, Eduardo Molina v. Venchi 2, LLC, et al., concerned injuries allegedly resulting from a construction accident at premises owned by Central Area Equities Associates LLC (CAEA) and leased by Venchi 2 LLC with the USDC required to determine who was entitled to a defense from which insurer.
KEY POINTS
Parties Involved:
CAEA is insured by Associated Industries Insurance Company, Inc. ...
Exclusion Establishes that There is No Duty to Defend Off Site Injuries
Post 5103
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Attack by Vicious Dog Excluded
In Foremost Insurance Company, Grand Rapids, Michigan v. Michael B. Steele and Sarah Brown and Kevin Lee Price, Civil Action No. 3:24-CV-00684, United States District Court, M.D. Pennsylvania (June 16, 2025)
Foremost Insurance Company (“Foremost”) sued Michael B. Steele (“Steele”), Sarah Brown (“Brown”), and Kevin Lee Price (“Price”) (collectively, “Defendants”). Foremost sought declaratory relief in the form of a declaration that
1. it owes no insurance coverage to Steele and has no duty to defend or indemnify Steele in an underlying tort action and
2. defense counsel that Foremost has assigned to Steele in the underlying action may withdraw his appearance.
Presently before the Court are two ...
ZIFL Volume 29, Issue 10
The Source for the Insurance Fraud Professional
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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 ...
Professional Health Care Services Exclusion Effective
Post 5073
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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 ...
A Heads I Win, Tails You Lose Story
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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...
