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October 17, 2022
Sanctions Against Lawyer Suing Broker Affirmed

It is Frivolous to File Same Suit Against Another Defendant After First is Dismissed

Barry Zalma

Read the full article at https://lnkd.in/gU53XnUY and see the full video at https://lnkd.in/gcph95Zw and at https://lnkd.in/g4WAZiZU and at https://zalma.com/blog plus more than 4350 posts.

Dimitri Enterprises, Inc. (“Dimitri”) and its attorney, Richard J. Flanagan, appealed from the district court’s June 24, 2021 order imposing $24,675.00 in sanctions pursuant to Federal Rule of Civil Procedure 11. Dimitri, a roofing contractor, filed this lawsuit in connection with a dispute regarding insurance coverage for an employee’s injuries on a construction project.

In Dimitri Enterprises, Inc. v. Spar Insurance Agency LLC, NIF Services of New Jersey, Inc., and Scottsdale Insurance Company, No. 21-1722-cv, United States Court of Appeals, Second Circuit (October 6, 2022) the complaint asserted claims against defendant Scottsdale Insurance Company (“Scottsdale”), which was Dimitri’s commercial general liability insurance carrier, and defendant NIF Services of New Jersey, Inc. (“NIF”), which was originally alleged to be Dimitri’s broker.

The district court granted NIF’s motion to dismiss both claims against it, reasoning that the negligence claim was time-barred, and the breach of contract claim was inadequately pled because Dimitri did not allege any contractual terms that NIF breached. Dimitri then filed a second amended complaint (the “SAC”) against an additional defendant, Spar Insurance Agency, LLC (“Spar”), which was the retail insurance broker for Dimitri’s policy.

In its SAC, Dimitri brought claims against Spar for negligence and breach of contract that were identical to the negligence and breach of contract claims that the district court already dismissed against NIF. The district court granted Spar’s Motion to dismiss.

In addition, the district court granted Spar’s subsequent motion for sanctions, explaining that “plaintiff’s counsel knew or should have known that the claims against Spar were likewise subject to dismissal” because “identical claims against NIF were previously dismissed as either time-barred or inadequately pled.”

DISCUSSION

The Second Circuit reviewed the district court’s imposition of sanctions pursuant to Rule 11 of the Federal Rules of Civil Procedure for an abuse of discretion. This deferential standard is applicable to the review of Rule 11 sanctions because the district court is familiar with the issues and litigants and is thus better situated than the court of appeals to marshal the pertinent facts and apply a fact-dependent legal standard. An abuse of discretion only occurs if the district court based its ruling on an erroneous view of the law or on a clearly erroneous assessment of the evidence or rendered a decision that cannot be located within the range of permissible decisions.

RULE 11 SANCTIONS

Rule 11 explicitly and unambiguously imposes an affirmative duty on each attorney to conduct a reasonable inquiry into the viability of a pleading before it is signed. The standard for triggering the award of fees under Rule 11 is objective unreasonableness and is not based on the subjective beliefs of the person making the statement.

In particular, with respect to the statute of limitations on the negligence claim, Dimitri asserts that “the suggestion of a later date for the accrual of a negligence claim was not frivolous, rather it was responsible and zealous.” Regardless, the Second Circuit, concluded it could discern no abuse of discretion in the district court’s decision to impose sanctions.

Under Rule 11, a litigant’s obligations with respect to the contents of filings are not measured solely as of the time they are filed with or submitted to the court but include reaffirming to the court and advocating positions contained in those pleadings and motions after learning that they cease to have any merit. The Second Circuit has upheld sanctions where an attorney or litigant may have initially filed a non-frivolous claim but, after the district court’s dismissal of that claim, re-filed a similar or identical claim in an amended pleading without any good-faith basis for overcoming the district court’s prior ruling.

Finding that the district court did not abuse its discretion by the Second Circuit concluded that imposing sanctions against Dimitri’s counsel because Dimitri brought the exact same negligence and breach of contract claims against Spar that had already been dismissed against NIF. Although the claims were brought against a different party, the particular grounds for dismissal of the claims against NIF (the wholesale broker) applied with equal force to the assertion of the same claims against Spar (the retail broker).

With respect to the negligence claim, the district court had ruled that the claim against NIF was time-barred because the claim accrued, at the latest, when Dimitri received notice that the coverage was denied. In the wake of that ruling, Dimitri made no argument as to how a different accrual date could possibly apply as to its identical claim subsequently brought against Spar, which related to the exact same denial of coverage. Moreover, at a hearing on the sanctions motion, Dimitri’s counsel conceded to the district court that the negligence claim against Spar was time-barred.

Plaintiff’s counsel filed the same defective claims against a new defendant. Therefore, the Second Circuit concluded that such claims were not made in good faith.

It was “patently clear” from that reasoning that amending the pleading to assert the same claims against Spar had absolutely no chance of success.

ZALMA OPINION

Some people and their lawyers believe that suing an insurance company or an insurance agent/broker is always a slam-dunk suit that cannot lose. In this case the client and his lawyer were surprised by an obvious dismissal because the suit was time barred and just filed the same suit against another defendant that they knew was also time barred. The case was dismissed and counsel was properly sanctioned under Rule 11 for submitting a frivolous suit.

(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] and receive videos limited to subscribers of Excellence in Claims Handling at locals.com https://zalmaoninsurance.locals.com/subscribe.

Subscribe to Excellence in Claims Handling at https://barryzalma.substack.com/welcome.

Now available Barry Zalma’s newest book, The Tort of Bad Faith, available here. The new book is available as a Kindle book, a paperback or as a hard cover.

Write to Mr. Zalma at [email protected]; http://www.zalma.com; http://zalma.com/blog; daily articles are published at
Zalma on Insurance
Insurance, insurance claims, insurance law, and insurance fraud .

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

00:09:40
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Zalma’s Insurance Fraud Letter – January 15, 2026

ZIFL Volume 30, Number 2

THE SOURCE FOR THE INSURANCE FRAUD PROFESSIONAL

Post number 5260

Read the full article at https://lnkd.in/gzCr4jkF, see the video at https://lnkd.in/g432fs3q and at https://lnkd.in/gcNuT84h, https://zalma.com/blog, and at https://lnkd.in/gKVa6r9B.

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 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/ This issue contains the following articles about insurance fraud:

Read the full 19 page issue of ZIFL at https://zalma.com/blog/wp-content/uploads/2026/01/ZIFL-01-15-2026.pdf.

The Contents of the January 15, 2026 Issue of ZIFL Includes:

Use of the Examination Under Oath to Defeat Fraud

The insurance Examination Under Oath (“EUO”) is a condition precedent to indemnity under a first party property insurance policy that allows an insurer ...

00:09:20
January 14, 2026
USDC Must Follow the Finding of the Administrator of the ERISA Plan

ERISA Life Policy Requires Active Employment to Order Increase in Benefits

Post 5259

Read the full article at https://lnkd.in/gXJqus8t, see the full video at https://lnkd.in/g7qT3y_y and at https://lnkd.in/gUduPkn4, and at https://zalma.com/blog plus more than 5250 posts.

In Katherine Crow Albert Guidry, Individually And On Behalf Of The Estate Of Jason Paul Guidry v. Metropolitan Life Insurance Company, et al, Civil Action No. 25-18-SDD-RLB, United States District Court, M.D. Louisiana (January 7, 2026) Guidry brought suit to recover life insurance proceeds she alleges were wrongfully withheld following her husband’s death on January 9, 2024.

FACTUAL BACKGROUND

Jason Guidry was employed by Waste Management, which provided life insurance coverage through Metropolitan Life Insurance Company (“MetLife”). Plaintiff contends that after Jason’s death, the defendants (MetLife, Waste Management, and Life Insurance Company of North America (“LINA”)) engaged in conduct intended to confuse and ultimately deny her entitlement to...

00:07:30
January 13, 2026
Mediation in State Court Resolves Action in USDC

Failure to Respond to Motion to Dismiss is Agreement to the Motion
Post 5259

Read the full article at https://lnkd.in/gP52fU5s, see the video at https://lnkd.in/gR8HMUpp and at https://lnkd.in/gh7dNA99, and at https://zalma.com/blog plus more than 5250 posts.

In Mercury Casualty Company v. Haiyan Xu, et al., No. 2:23-CV-2082 JCM (EJY), United States District Court, D. Nevada (January 6, 2026) Plaintiff Mercury Casualty Company (“plaintiff”) moved to dismiss. Defendant Haiyan Xu and Victoria Harbor Investments, LLC (collectively, “defendants”) did not respond.

This case revolves around an insurance coverage dispute when the parties could not be privately resolved, litigation was initiated in the Eighth Judicial District Court of Nevada. Plaintiff subsequently filed for a declaratory judgment in this court.

On or about April 15, 2025, the state court action was dismissed with prejudice pursuant to a stipulation following mediation. Plaintiff states that the state court dismissal renders its ...

00:04:26
December 31, 2025
“Sudden” is the Opposite of “Gradual”

Court Must Follow Judicial Precedent
Post 5252

Read the full article at https://www.linkedin.com/pulse/sudden-opposite-gradual-barry-zalma-esq-cfe-h7qmc, see the video at and at and at https://zalma.com/blog plus more than 5250 posts.

Insurance Policy Interpretation Requires Application of the Judicial Construction Doctrine

In Montrose Chemical Corporation Of California v. The Superior Court Of Los Angeles County, Canadian Universal Insurance Company, Inc., et al., B335073, Court of Appeal, 337 Cal.Rptr.3d 222 (9/30/2025) the Court of Appeal refused to allow extrinsic evidence to interpret the word “sudden” in qualified pollution exclusions (QPEs) as including gradual but unexpected pollution. The court held that, under controlling California appellate precedent, the term “sudden” in these standard-form exclusions unambiguously includes a temporal element (abruptness) and cannot reasonably be construed to mean ...

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December 29, 2025
Doctor Accused of Insurance Fraud Sues Insurer Who Accused Him

Lack of Jurisdiction Defeats Suit for Defamation

Post 5250

Posted on December 29, 2025 by Barry Zalma

See the video at and at

He Who Represents Himself in a Lawsuit has a Fool for a Client

In Pankaj Merchia v. United Healthcare Services, Inc., Civil Action No. 24-2700 (RC), United States District Court, District of Columbia (December 22, 2025)

FACTUAL BACKGROUND
Parties & Claims:

The plaintiff, Pankaj Merchia, is a physician, scientist, engineer, and entrepreneur, proceeding pro se. Merchia sued United Healthcare Services, Inc., a Minnesota-based medical insurance company, for defamation and related claims. The core allegation is that United Healthcare falsely accused Merchia of healthcare fraud, which led to his indictment and arrest in Massachusetts, causing reputational and business harm in the District of Columbia and nationwide.

Underlying Events:

The alleged defamation occurred when United ...

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December 15, 2025
Zalma’s Insurance Fraud Letter – December 15, 2025

Zalma’s Insurance Fraud Letter

Read the full article at https://lnkd.in/dG829BF6; see the video at https://lnkd.in/dyCggZMZ and at https://lnkd.in/d6a9QdDd.

ZIFL Volume 29, Issue 24

Subscribe to the e-mail Version of ZIFL, it’s Free! https://visitor.r20.constantcontact.com/manage/optin?v=001Gb86hroKqEYVdo-PWnMUkcitKvwMc3HNWiyrn6jw8ERzpnmgU_oNjTrm1U1YGZ7_ay4AZ7_mCLQBKsXokYWFyD_Xo_zMFYUMovVTCgTAs7liC1eR4LsDBrk2zBNDMBPp7Bq0VeAA-SNvk6xgrgl8dNR0BjCMTm_gE7bAycDEHwRXFAoyVjSABkXPPaG2Jb3SEvkeZXRXPDs%3D

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/

Zalma’s Insurance Fraud Letter

Merry Christmas & Happy Hannukah

Read the following Articles from the December 15, 2025 issue:

Read the full 19 page issue of ZIFL at ...

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