How Giving No Quarter Worked
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How Giving No Quarter Worked
Many years ago a client I represented was offended that an insured tried to defraud him and the people who were names in the syndicate he represented at Lloyd’s, London. I walked the Underwriter through the debris of the house that was burned, showed him some of the remains of the allegedly highly valuable fine arts, and then explained how he was deceived into issuing the policy. I was the attorney for Lloyd’s underwriters for the fine arts and Imperial Casualty for the homeowners policy. Once it became clear to the Underwriter I was given the following instruction:
“Take No Prisoners!” The military instruction to give no mercy to the enemy. Typically if you give or grant no quarter, you treat someone—usually an opponent or foe of some kind—harshly. You don’t take pity on them or give them any leeway or concession. That is what I did. The claim was denied, the policy was rescinded, and the bad faith suit that resulted was litigated without quarter or concession. It took more than five years, a motion for summary judgment, an appeal, and eventually a judgment in favor of the insurers that resulted in payment to the insurers of every dollar advanced and every dollar expended in investigation and defense of the bad faith suit. That was followed by suits against the claims adjuster, death threats and a bomb threat that took 15 years of my professional life. The appellate decision can be read at Imperial Casualty & Indemnity Co. v. Sogomonian, 243 Cal.Rptr. 639, 198 Cal.App.3d 169 (Cal. App. 1988).
After Mr. Sogomonian and his co-defendants were compelled to pay fraudulent claims against Imperial and the Lloyd’s underwriters dropped precipitously. Giving no quarter to a fraud perpetrator not only defeated a fraudulent claim but deterred others from attempting fraud.
The Imperial v. Sogomonian case and many similar cases is why I am convinced that giving no quarter to a fraud perpetrator is the best way to deter and defeat insurance fraud and why I wrote this book to convince more insurance professionals to emulate the insurers that defeated the Sogomonian attempt at fraud.
How to Proactively Work to Defeat or Deter Insurance Fraud
Available as a Kindle Edition, a Paperback or a Hardcover
What every insurer should know about how it can be proactive in the efforts against insurance fraud by refusing to pay every fraudulent claim, by refusing to settle litigation brought by fraud perpetrators and by proactively taking the fraud perpetrators to court by seeking damages for common law fraud and take the profit out of insurance fraud.
No one knows the true extent of insurance fraud because most attempts at insurance fraud succeed. Estimates are extrapolated from those few people who attempt insurance fraud that are caught.
Insurance fraud is a crime in most states of the United States and in most countries the usual victims of the crime of insurance fraud are insurers. Some creative people have created fraudulent insurance companies that exist to defraud the insurance buying public who acquire insurance from the fraudulent insurers.
The crime of insurance fraud is ubiquitous and is committed by every race, gender, national origin, religion, or sexual orientation.
Unlike other victims of crime state legislatures require insurers create special investigative units (SIU) to thoroughly investigate all potential insurance fraud and present evidence to the authorities so that they can prosecute insurance fraud. Unfortunately, experience of the insurance industry has established that even when the insurer’s SIU presents a case to the state’s Fraud Division or Fraud Bureau for criminal prosecution, it is rare that a prosecution is commenced and a conviction obtained.
State insurance departments brag about convictions in double digits when they receive as many as 1500 reports of suspected fraudulent claims every 30 days. Prosecutors dislike insurance fraud cases because they are usually document heavy while an assault, rape, murder or drunk driving are usually summarized by a single police report and are, therefore, relatively easy to prosecute to a jury or obtain a plea of guilty.
Some insurers are buying Artificial Intelligence software to detect insurance fraud. Others hire retired police officers to operate the SIU and ignore their experienced insurance claims handlers.
Most do the minimum necessary to fulfill the requirements of the anti-fraud statutes and regulations concluding that it is better to pay the fraudsters than to fight fraud attempts proactively.
All insurers and those who regulate insurers agree that regardless of where the insurance is sold, regardless of where the promises made by an insurance policy are required to indemnify an insured, insurance fraud is a serious problem for the insurance industry. All attempt to deter or defeat insurance fraud to one extent or another.
All recognize that if there is an insurance claims that is denied for fraud it is axiomatic that the insured, so accused, will file suit for breach of contract and for the tort of bad faith. Bad faith lawsuits, even when they fail, take the value out of the effort to deter or defeat insurance fraud since defense of the bad faith suit will usually exceed the amount of the claim that was denied.
On an individual claim basis it is never cost effective to reject the claim for fraud. However, knowledgeable insurance fraud investigative professionals recognize that an aggressive effort against insurance fraud, refusal to pay a settlement to avoid litigation, and forcing the fraud perpetrator to litigate through trial and appeal will become known to those who make a living defrauding insurers, that the insurer is not a pushover and will avoid fraud attempts against that insurer and move to insurers the fraud perpetrators know will pay rather than fight.
Available as a paperback here. Available as a hardcover here. Available as a Kindle Book here.
(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
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...