Insured Convicted of Fraud But Still Sought UIM Benefits
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Posted on July 8, 2022 by Barry Zalma
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“Chutzpah” is a Yiddish term meaning “unmitigated gall” where, for example, a defendant convicted of murdering his parents asks for clemency because he is an orphan.
Kevin Muir made a claim for underinsured motorist benefits after being injured in an auto accident that fit the definition of Chutzpah. His insurance company denied the claim because Muir had admittedly previously made fraudulent statements in an effort to obtain personal injury protection benefits related to the same accident and was convicted of a crime relating to the claim. Although the policy, like all insurance policies, excluded claims related to fraud, Muir still sued the insurance company after it denied his claim. The insurer filed a motion for summary judgment and the district court dismissed Muir’s lawsuit.
In Kevin Muir v. Cincinnati Insurance Company, 2022 UT App 80, No. 20210289-CA, Court of Appeals of Utah (June 24, 2022) the Court of Appeals found the fraud exclusion clear and unambiguous.
BACKGROUND
Muir is listed as a “covered driver” under an auto insurance policy (the Policy) issued to him by Cincinnati Insurance Company (Cincinnati). The Policy provided several types of coverage, including liability, personal injury protection (PIP), uninsured/underinsured motorist (UIM), and collision.
In 2017, Muir was riding as a passenger in a vehicle that was rear-ended by another vehicle. Muir suffered injuries and received $25,000 in damages from each of the two drivers’ insurance companies-amounts that represented the policy limits of those policies. Cincinnati also paid out PIP benefits to Muir under the Policy.
THE FRAUD
In connection with his PIP claim, Muir “stated that he was not working due to the injuries he sustained,” but this statement was false: Muir was, in fact, “working as a self-employed truck driver.” As a result of his false statement, Muir “was charged criminally with insurance fraud and entered ‘no contest’ pleas to reduced Class A misdemeanors.”
THE CLAIM
Muir subsequently made a demand for UIM benefits under the Policy. However, Cincinnati denied coverage, relying on the Policy’s fraud exclusion, which reads:
‘We’ do not provide coverage for any ‘covered person’ who has made fraudulent statements or engaged in fraudulent conduct in connection with any accident or loss for which coverage is sought under this policy.
Following this denial, Muir sued Cincinnati for breach of contract and breach of the duty of good faith and fair dealing. The parties filed cross-motions for summary judgment on the question of whether the Policy’s fraud exclusion precluded Muir’s claim for UIM benefits.
The district court granted Cincinnati’s motion and denied Muir’s.
ANALYSIS
Muir claimed that the Policy’s fraud exclusion was ambiguous and asked the court to construe the ambiguity in his favor.
The Court of Appeals noted that an insurance policy is merely a contract between the insured and the insurer and is construed pursuant to the same rules applied to ordinary contracts. An insurer may exclude from coverage certain losses by using language which clearly and unmistakably communicates to the insured the specific circumstances under which the expected coverage will not be provided.
The Policy contains a fraud exclusion that bars coverage when a claimant makes a fraudulent statement in connection with any accident or loss for which coverage is sought. Muir acknowledged that he made fraudulent statements in securing PIP benefits in connection with the accident in question but argued that those fraudulent statements should not negate his claim for UIM benefits.
The fraud exclusion is contained in the “General Provisions” section of the Policy, not within any specific coverage provision, so the exclusion is applicable to all types of coverage provided by the Policy. The inclusion of the word “accident” in the fraud clause links the misrepresentation to the accident in question, not just to the coverage sought, and makes Muir’s preferred reading of the provision unreasonable, especially given Muir’s admission that his “fraudulent conduct was indeed ‘connected’ to the accident” at issue.
The accident for which Muir sought UIM coverage is the same accident for which he made fraudulent statements in seeking PIP coverage. And the Policy precludes coverage sought in connection with any accident for which a covered person has made fraudulent statements.
The Court of Appeal, therefore, agreed with the district court’s determination that Cincinnati was, as a matter of law, within its rights under the Policy to deny Muir’s claim for UIM coverage.
ZALMA OPINION
This case teaches that there is no such thing as a small or inconsequential fraud. The fraud language of the policy was clear and unambiguous as it applied to the entire policy. Muir fraudulently collected on his PIP claim when he succeeded in his attempt to defraud Cincinnati and was convicted criminally of the attempted fraudulent claim. His chutzpah in seeking UIM coverage under the same policy where he was, because of his fraud was unmitigated and not worthy of a law suit let alone an appeal. In fact, Cincinnati should seek to recover as restitution the money paid in PIP benefits.
(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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Notice of Claim Later than 60 Days After Expiration is Too Late
Post 5089
Injury at Massage Causes Suit Against Therapist
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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 ...
ZIFL – Volume 29, Issue 11
The Source for the Insurance Fraud Professional
Posted on June 2, 2025 by Barry Zalma
Post 5087
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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
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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 ...
No Coverage if Home Vacant for More Than 60 Days
Failure to Respond To Counterclaim is an Admission of All Allegations
Post 5085
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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 ...
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 ...
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...