This One Isn’t Fiction Because No One Would Believe It
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I received a copy of findings of fact and conclusions of law in a case filed in the U.S. District Court for the Central District of California entitled CIGNA Property and Casualty Insurance Company v. Polaris Pictures Corporation, U.S. Inbanco, Ltd., Continental Pictures Corporation, Paul Ebeling, Kendall Earl Capps, Adrien Wirz, and Jacob Wizman there docketed as case number CV 93-2259 JSL.
On February 20, 1997 United States District Judge J. Spencer Letts found a lawyer and others had committed fraud and purchased a policy of Marine Insurance for the sole purpose of sinking a boat. The findings of Judge Letts read better than I could ever imagine. Here are parts of what Judge Letts concluded:
The evidence presented to the court …convinces the Court that, according to the overwhelming weight of the evidence, that defendants Polaris Pictures Corp. (‘Polaris’), and U.S. Inbanco Ltd. (‘Inbanco’), … conspired with at least one of the named defendants in this action, and a non-party lawyer (the ‘lawyer conspirator’), to engage in a very sophisticated fraud to collect insurance proceeds from plaintiff, Cigna Property and Casualty Insurance Company (‘Cigna’), a marine insurer.
In essence, the fraud intentionally concealed from Cigna the material fact that the conspirator’s purpose in purchasing the insurance from Cigna was not to protect themselves against the risk of an unknown future event, but rather to precipitate an accident which would allow them to collect on it. As a result, a judgment of rescission of [the policy] … issued to Polaris and Inbanco is warranted.…
On June 9, 1992, the lawyer conspirator signed an Order Contract to purchase a brand new 76’ Azimut motor yacht for $1.9 million.
Prior to June 1992, the lawyer conspirator had sustained three total losses of yachts that he either owned or held ownership interests in. Each of these prior yacht losses was insured and each prior yacht loss was paid in full by the respective insurer.
The lawyer conspirator then arranged for Continental to ‘sell’ the yacht to Polaris. The Continental-Polaris transaction was a stock transaction between a company about which little evidence was presented (Continental) and a company with virtually no assets (Polaris).
Polaris was formed by the lawyer conspirator and completely controlled by him at all relevant times. It was also located at the same address as the lawyer conspirator’s residence.
The evidence showed that Polaris never did business of any kind or substance. In addition, the evidence showed that Polaris was placed between the principals of this fraud as a diversion in order to disguise the identity of the person who would get the money in the event of a loss – namely, the lawyer conspirator.
[T]he court finds that defendants’ fraudulent scheme consisted in part of using the insurance proceeds to pay to Inbanco, as a ‘creditor,’ the sham ‘debt’ secured by the vessel.…
[T]he court finds …a conscious plan to defraud Cigna by temporarily distancing the lawyer conspirator from Polaris until the insurance proceeds had been paid.… “All of the ostensible transactions discussed above, with the exception of the purchase of the boat, were among parties all closely tied to the lawyer conspirator, and the corporate parties did not have any meaningful assets.
[T]he reason the lawyer conspirator took such extensive measures to distance himself from these corporations and transactions was to divert attention away from his own personal loss history of sinking vessels.…
Polaris and Inbanco eventually purchased marine insurance for the yacht, named “Principe Di Pictor,” from Cigna… The Application [for the insurance] also failed to state the material fact that Polaris and Inbanco’s purpose for purchasing this insurance was to collect on it, and that a preplanned event for the destruction of the yacht and collection of the insurance was soon and certain to occur. …
The yacht was scuttled on November 7, 1992 [two weeks after the policy was issued] off the Coast of Italy during its maiden voyage. The lawyer conspirator … [was] on board at the time.…
The account of the scuttling from the lawyer conspirator … was that the yacht, allegedly worth $3.5 or $3.62 million, and the lives and bodies of the people on it, was entrusted to a person met for the first time in a dockside restaurant in Naples. This person, whose documents were written in a foreign language, brought with him two other persons who did not speak English and six black duffel bags with undisclosed contents. The three strange men were allegedly applicants for the jobs of Captain and crew.
The Court finds defendants’ claim …to be wholly preposterous. The Court finds the account of the scuttling so incredible that standing alone it would raise serious questions as to whether the boat was deliberately scuttled.…
[P]urchasing insurance, not for the purpose of insuring a risk, but rather for the purpose of collecting the insurance for an event that is being planned, is a highly material fact that should be stated to the insurer.…
The lawyer conspirator was without any credibility as a witness, and he looked, acted and sounded very much like a conspirator in a dishonest scheme. …The lawyer conspirator’s testimony was not cogent and his financial records were very difficult to follow.
The news report did not name the lawyer conspirator. I had dealt with him several times with regard to fraudulent insurance claims so I called the trial lawyer and just asked:
“Is the lawyer conspirtor’s name Rex?
The trial lawyer, Neil S. Lerner was shocked. “How did you know?”
I explained my history with lawyer Rex and wanted to thank Mr. Lerner and all the lawyers at Sands Narwitz Forgie Leonard & Lerner who tried the case on behalf of CIGNA, for finally defeating a fraudulent claim presented by Rex, a long-time nemesis of the insurance industry in California.
I also wish to thank Judge Letts for seeing through an insurance fraud and recognizing that an insurance company can be a victimized by an insured. At the direction of Judge Letts, the lawyer – Rex DeGeorge – was prosecuted by the U.S. Attorney and convicted of mail and wire fraud.
He is now serving a long sentence in federal prison.
ZALMA OPINION
This case is important, and unusual, because it affirmed a rescission based on blatant fraud in obtaining insurance that allowed the insurer, CIGNA, to rescind the policy from its inception. It is more important because the Judge Letts referred to the U.S. Attorney the conspirator who was arrested, tried, convicted and sentenced to federal prison for fraud. Although I held out hope for other judges to emulate Judge Letts, but I have been disappointed.
(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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Convicted Criminal Seeks to Compel Receiver to Protect his Assets
Post number 5291
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The Work of a Court Appointed Receiver is Constitutionally Protected
In Simon Semaan et al. v. Robert P. Mosier et al., G064385, California Court of Appeals, Fourth District, Third Division (February 6, 2026) the Court of Appeals applied the California anti-SLAPP statute which protects defendants from meritless lawsuits arising from constitutionally protected activities, including those performed in official capacities. The court also considered the doctrine of quasi-judicial immunity, which shields court-appointed receivers from liability for discretionary acts performed within their official duties.
Facts
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When There are Two Different Other Insurance Clauses They Eliminate Each Other and Both Insurers Owe Indemnity Equally
Post number 5289
In Great West Casualty Co. v. Nationwide Agribusiness Insurance Co., and Conserv FS, Inc., and Timothy A. Brennan, as Administrator of the Estate of Pat- rick J. Brennan, deceased, Nos. 24-1258, 24-1259, United States Court of Appeals, Seventh Circuit (February 11, 2026) the USCA was required to resolve a dispute that arose when a tractor-trailer operated by Robert D. Fisher (agent of Deerpass Farms Trucking, LLC-II) was involved in a side-impact collision with an SUV driven by Patrick J. Brennan, resulting in Brennan’s death.
Facts
Deerpass Trucking, an interstate motor carrier, leased the tractor from Deerpass Farms Services, LLC, and hauled cargo for Conserv FS, Inc. under a trailer interchange agreement. The tractor was insured by Great West Casualty Company with a $1 million policy limit, while the trailer was insured by Nationwide Agribusiness Insurance Company with a $2 million ...
Opiod Producer Seeks Indemnity from CGL Insurers
Post number 5288
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Insurers Exclude Damages Due to Insured’s Products
In Matthew Dundon, As The Trustee Of The Endo General Unsecured Creditors’ Trust v. ACE Property And Casualty Insurance Company, et al., Civil Action No. 24-4221, United States District Court, E.D. Pennsylvania (February 10, 2026) Matthew Dundon, trustee of the Endo General Unsecured Creditors’ Trust, sued multiple commercial general liability (CGL) insurers for coverage of opioid-related litigation involving Endo International PLC a pharmaceutical manufacturer.
KEY FACTS
Beginning as early as 2014, thousands of opioid suits were filed by governments, third parties, and individuals alleging harms tied to opioid manufacturing and marketing.
Bankruptcy & Settlements
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Passover for Americans
Posted on February 19, 2026 by Barry Zalma
“The Passover Seder For Americans”
For more than 3,000 years Jewish fathers have told the story of the Exodus of the enslaved Jews from Egypt. Telling the story has been required of all Jewish fathers. Americans, who have lived in North America for more than 300 years have become Americans and many have lost the ability to read, write and understand the Hebrew language in which the story of Passover was first told in the Torah. Passover is one of the many holidays Jewish People celebrate to help them remember the importance of G_d in their lives. We see the animals, the oceans, the rivers, the mountains, the rain, sun, the planets, the stars, and the people and wonder how did all these wonderful things come into being. Jews believe the force we call G_d created the entire universe and everything in it. Jews feel G_d is all seeing and knowing and although we can’t see Him, He is everywhere and in everyone.We understand...
Passover for Americans
Posted on February 19, 2026 by Barry Zalma
Read the full article at https://www.linkedin.com/pulse/passover-americans-barry-zalma-esq-cfe-5vgkc.
“The Passover Seder For Americans”
For more than 3,000 years Jewish fathers have told the story of the Exodus of the enslaved Jews from Egypt. Telling the story has been required of all Jewish fathers. Americans, who have lived in North America for more than 300 years have become Americans and many have lostthe ability to read, write and understand the Hebrew language in which the story of Passover was first told in the Torah.
Passover is one of the many holidays Jewish People celebrate to help them remember the importance of G_d in their lives. We see the animals, the oceans, the rivers, the mountains, the rain, sun, the planets, the stars, and the people and ...
You Get What You Pay For – Less Coverage Means Lower Premium
Post number 5275
Posted on January 30, 2026 by Barry Zalma
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When Experts for Both Sides Agree That Two Causes Concur to Cause a Wall to Collapse Exclusion Applies
In Lido Hospitality, Inc. v. AIX Specialty Insurance Company, No. 1-24-1465, 2026 IL App (1st) 241465-U, Court of Appeals of Illinois (January 27, 2026) resolved the effect of an anti-concurrent cause exclusion to a loss with more than one cause.
Facts and Background
Lido Hospitality, Inc. operates the Lido Motel in Franklin Park, Illinois. In November 2020, a windstorm caused one of the motel’s brick veneer walls to collapse. At the time, Lido was insured under a policy issued by AIX Specialty Insurance Company which provided coverage for windstorm damage. However, the policy contained an exclusion for any loss or damage directly or indirectly resulting from ...
