Zalma on Insurance
Education • Business
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.
Interested? Want to learn more about the community?
June 03, 2022
Insurance Contract Law

The Law of Unintended Consequences and The Tort of

Read the full article at https://lnkd.in/gFe2jYAk and see the full video at https://lnkd.in/gZKupNnu and at https://lnkd.in/gYX-tJQe and at https://zalma.com/blog plus more than 2450 posts.

See the full video at https://rumble.com/v173p1n-the-law-of-unintended-consequences-and-the-tort-of-bad-faith.html and at

In a typical contract, one party has a duty to perform (construct a building, deliver goods, convey real estate, pay indemnity) and the other party has a duty to pay money or perform a task. Breach by the performer may take the form of nonperformance, defective performance, or delay in performance. The primary purpose of damages for breach of a contract is to protect the promisee’s expectation interest in the promisor’s performance. Damages should put the plaintiff in as good a position as if the defendant had fully performed as required by the contract. Damages should never provide a profit to the non-breaching party.

Insurance, like all parts of modern society, is subject to the deprivations of the law of unintended consequences. In the USA alone people pay to insurers more than $1.2 trillion dollars in premiums and insurers pay out in claims as much or more than they take in. Profit margins are small because competition is fierce and a year’s profits can be lost to a single firestorm, earthquake, hurricane, flood or unexpected bad faith law suit.

Neither the courts nor the governmental agencies seem to be aware that in a modern, capitalistic society, a healthy and viable insurance is a necessity. No person would take the risk of starting a business, buying a home or driving a car without insurance. The risk of losing everything would be too great. By using insurance to spread the risk among all the costs of taking the risk to start a business, buy a home or drive a car becomes possible. The persons insured are dependent on their insurer to take the risk the insureds are not willing to take alone.

Insurance contracts can be simple or exceedingly complex, depending upon the risks taken by the insurer. Regardless, insurance is only a contract whose terms are agreed to by the parties to the contract.

What those quick to settle bad faith suits, most of the massive verdicts were reversed or reduced on appeal. The insurers who always acted in good faith were forced to raise their premiums to cover the payments to avoid bad faith suits. The bad actors also raised their premium, but not as much as the good faith insurers, and lost little business because their premiums were less. They continued to act in bad faith, paid less to insureds than their good faith competitors, and profited while those who treated their insureds in good faith, lost money.

The good faith insurers, faced with the massive verdicts, allowed fear to control reason and even paid claims that were improper or fraudulent. The extra cost was passed on to all insurance consumers, not just to the insurers who acted improperly. The bad actors continued their wrongful acts and only paid the few insureds that sued, after a long and contentious defense to the lawsuit.

Honest and professional insurers paid fraud perpetrators and claims the policy never intended to cover for fear of being accused as being the same as the bad actors. Those who exercised good faith were punished, and those who dealt with insureds in bad faith, profited.

The tort of bad faith, designed to help the innocent, resulted in punishing the honest and professional insurers, rewarding the insurers who acted in bad faith with profit. Also, because of the fear of punishment with bad faith suits, insurers allowed many frauds to succeed rather than face potential tort damages. Contract terms and conditions that were clear and unambiguous were ignored to avoid litigation.

In the more than 70 years of application across the United States, the tort of bad faith has not, in my opinion, had a salutary effect on the insurance business or the people and businesses who are insured. Insurance costs have increased more than is reasonable or necessary so that sufficient funds exist to pay claims and tort damages from those insureds who believe they were wronged.

Not all bad faith suits are certain winners. Not every bad faith suit results in a punitive damages award. In a first party claim in New Jersey brought by the insured against its own insurance company the appellate court conclude that to establish an insurer’s bad faith, the insured must demonstrate that coverage was so clear it was not fairly debatable. If there is a valid question of coverage, i.e., the claim is fairly debatable, the insurer bears no liability for bad faith. [Wacker-Ciocco v. Gov’t Emp. Ins. Co., 439 N.J. Super. 603, 611 (App. Div. 2015)]. Insurers in fear of a potential bad faith judgment, a plaintiff must show the lack of a reasonable basis for denying the claim or unreasonably delaying its processing, and the insurer’s knowledge or reckless disregard that it was acting unreasonably. [Parko Props., LLC v. Mercer Ins. Co. of N.J. (N.J. Super. App. Div. 2020)]

Unfortunately, few insurers are willing to take a chance on convincing a jury that the decision to deny the claim was fairly debatable or that the decision made was as a result of a genuine dispute. In Louisiana and Mississippi, for example, multiple millions were paid to settle claims that flood damage was covered as a result of Hurricane Katrina, although the policies excluded flood and the plaintiff insureds failed to buy flood insurance. Mudslides in Southern California from hills denuded by wildfires, clearly excluded, are being paid because of fear of claims of bad faith and an aggressive department of insurance that construes a mudslide as a loss due to fire.

(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].

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; daily articles are published 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/

Interested? Want to learn more about the community?
What else you may like…
Videos
Posts
September 18, 2026
Expert May Only Testify to What Experience Supports

Insurance Expert May Not Testify to Speculative and Contains Unsupported Conclusions.

Posted on September 18, 2026 by Barry Zalma

See the full video at and at https://rumble.com/v7fmifw-expert-may-only-testify-to-what-experience-supports.html

In Michele A. Over, and The Estate Of Paul R. Over v. State Farm Mutual Automobile Insurance Company, and State Farm Fire And Casualty Company, Civil Action No. 23-cv-02243-PAB-STV, United States District Court, D. Colorado (September 14, 2026) Michele and Paul Over sued State Farm Fire and State Farm Auto over hail-damage and stolen-vehicle claims.

The operative dispute concerned State Farm Auto’s motion to exclude or limit opinions from plaintiffs’ insurance-industry expert, Aaron Castillo. Castillo.

Law

The proponent of expert testimony must establish by a preponderance of the evidence that an expert is qualified and that the opinions are helpful, sufficiently grounded, and reliably derived and applied. Experience-based opinions must explain how the...

00:03:10
September 17, 2026
Convicted on 29 Tax-Refund-Fraud Counts

150 Months in Prison for Tax Fraud
Post 4846

Posted on September 17, 2026 by Barry Zalma

See the full video at https://lnkd.in/g8rh3JBX and https://lnkd.in/gmkdy-9C, In United States Of America v. Thomas Addaquay, Nos. 25-10609, 25-10611, United States Court of Appeals, Eleventh Circuit (September 9, 2026) the Eleventh Circuit affirmed all challenged convictions, the 150-month aggregate sentence, and the challenged $4,123,474.55 restitution award.

FACTS

In United States Of America v. Thomas Addaquay, United States Of America v. Thomas Addaquay, Nos. 25-10609, 25-10611, United States Court of Appeals, Eleventh Circuit (September 9, 2026) the Eleventh Circuit affirmed all challenged convictions, the 150-month aggregate sentence, and the challenged $4,123,474.55 restitution award.
FACTS

Thomas Addaquay controlled United Consolidated Accounting and Business Services (UC), nominally a check-cashing business.

The government proved a three-stage tax-refund scheme that converted the resulting refund checks into usable funds through ...

00:05:23
September 14, 2026
Court Enforces Fifth Amendment & Refuses to Compel Answers

Major Fraud Perpetrator Asserts Fifth Amendment Privilege to Avoid Prosecution

Post 5489

Posted on September 14, 2026 by Barry Zalma

Fraudster Refuses to Answer Questions About His Alleged Fraud

See the full video at https://lnkd.in/gvicAMDr and at https://lnkd.in/gvicAMDr

In Great American Insurance Co. v. Gemstone Property Management, LLC, et al., No. 23-cv-9100 (LJL), United States District Court, S.D. New York (September 8, 2026) Great American Insurance Company alleged that it was defrauded through a scheme in which Subin Associates, LLP recruited individuals to stage construction-site injuries, arranged unnecessary medical treatment and litigation funding, and pursued fraudulent personal-injury claims.

Luis Manuel Garcia Salcedo, resulted in a $6 million settlement. Non-party Jose Hernandez allegedly worked as an assistant manager at Subin, operated Hernandez Associates, and owned litigation-funding companies that shared office space with Subin and provided services to its clients.

After Great American ...

00:05:14
October 16, 2026

Alleged Defamatory Statements Must be Of and Concerning Plaintiffs

Posted on October 16, 2026 by Barry Zalma

To Prove Defamation the Statement Must be Of and Concerning the Plaintiffs

Post 4867

In Michael Moloney and Sergio Cantu v. United Services Automobile Association, No. 04-25-00519-CV, Court of Appeals of Texas, Fourth District, San Antonio (October 14, 2026) Michael Moloney and Sergio Cantu appealed from the trial court’s granting of a traditional motion for summary judgment in favor of United Services Automobile Association (“USAA”) on their defamation claim.
BACKGROUND

Moloney and Cantu sued USAA for defamation, alleging that they are the principals of Informed Roofing & Restoration, LLC (“Informed Roofing”), which is primarily engaged in the residential roofing repair and replacement business, and that an employee or agent of USAA had made false and defamatory statements to the San Antonio Police Department (“SAPD”) concerning them.

Specifically, Moloney and Cantu alleged that an employee of ...

post photo preview
October 15, 2026
Zalma’s Insurance Fraud Letter – October 15, 2026

ZIFL – Volume 30, Issue 20 Subscribe to ZIFL here https://lnkd.in/gfpn78FM

Posted on October 15, 2026 by Barry Zalma

THE SOURCE FOR THE INSURANCE FRAUD PROFESSIONAL

Zalma’s Insurance Fraud Letter (ZIFL) continues its 30th year of publication dedicated to those involved in reducing the effect of insurance fraud.

ZIFL is published 24 times a year is written by Barry Zalma.

It is provided FREE to anyone who visits the site at https://lnkd.in/gVT5G9s

Six Insane Fraud Schemes the Trump Administration Has Uncovered Stealing from the taxpayer has now become a multi-billion-dollar industry in America. Obamacare has been a magnet for scammers.

Florida Insurance Agent Pleads Guilty in $300,000 Premium Finance Scheme

Daniel Raney, 41, who managed Raney Insurance and Raney Ventures in Pensacola, was arrested after AFCO Direct.

RIFE WITH FRAUD ALLOWS DEMANDS TO ESTABLISH RESTITUTION

Six Insane Fraud Schemes the Trump Administration Has Uncovered

Stealing from the taxpayer has now become a multi-billion-dollar industry in America – and the ...

post photo preview
October 14, 2026
District Court has Wide Discretion in Sentencing

Sentence for Stealing from Veterans Administration Reasonably Considers State Insurance Fraud & Arson Convictions

Post 4863

Posted on October 14, 2026 by Barry Zalma

In United States Of America v. Anthony Curtis Brewer, No. 26-10745, United States Court of Appeals, Eleventh Circuit (October 8, 2026) Anthony Curtis Brewer became the fiduciary for an incapacitated recipient of Department of Veterans Affairs survivor benefits and agreed to use her funds solely for her care and support without commingling them with his own.

The VA determined that he misused $67,232.33 and removed him as fiduciary in 2022. Brewer pleaded guilty to theft of more than $1,000 in government property under 18 U.S.C. § 641. At sentencing, the district court attributed $53,567 in loss to him, producing an advisory Guidelines range of 15 to 21 months.

Citing the victim’s vulnerability, Brewer’s attempts to avoid responsibility, and his other fraudulent conduct — including state convictions for arson and insurance fraud — the court ...

post photo preview
See More
Available on mobile and TV devices
google store google store app store app store
google store google store app tv store app tv store amazon store amazon store roku store roku store
Powered by Locals