Claims Commandment VII - Thou Shall Never Lie to an Insured
Barry Zalma
Read the full article at https://lnkd.in/gUqxEHEp and see the full video at https://lnkd.in/gPzkFYhz and at https://lnkd.in/gt_Uq9N5 and at https://zalma.com/blog plus more than 4350 posts.
Insurance is, and has been since the first policy was carved into a clay tablet, considered a business of the utmost good faith. The principle of utmost good faith (uberrimae fide) was, I believe, first stated in the English speaking world, in the British House of Lords by Lord Mansfield in 1766 in a case where he concluded that the duty of good faith rests upon both the insured and the insurer and held the insurer to its knowledge at the time the policy was signed. The insurer, like the insureds, took the premium, knowing the condition of the security provided, and could not upon loss claim the insurer was deceived. [Carter v. Boehm, 3 Burr 1905 (1766)]
As the old maxim says: “honesty is the best policy.” There is no excuse for an insurance claims professional to lie to an insured. Not only is a lie to an insured a failure to act with the utmost good faith, but it is also an action fraught with danger for the claims person and the insurer for whom he or she works. Keeping up a consistent lie is almost impossible. All definite statements can be corroborated or proven false by further investigation. If a lie is about a material fact, the falsehood will be proved to the expense of the insurer.
Lies to insureds — even when done for what the claims person believes is a good purpose — will invariably cause the insurer problems. Lies created on the run invariably include internal contradictions. A lie told to an insured can be, and most certainly will be, used by the insured to prove that the actions of the insurer were made intentionally and in bad faith such that the insurer will eventually be punished with punitive damages.
For example, in Allison v. Fire Insurance Exchange, 98 S.W.3d 227 (Tex.App. Dist.3 12/19/2002) a major punitive damage award was obtained by a plaintiff who presented evidence from the adjuster, who admitted she lied to the plaintiff about the authority to resolve a claim for mold damage. Although the case was reversed because of an excess verdict the lie cost the insurer a great deal of money when the case was eventually settled and started a spate of bad faith cases claiming refusal to pay for mold damage because of the excess and punitive judgment at the trial of the Allison case.
Claims people get into trouble when they fail to tell the truth to the insured about, among others, the following:
The check is in the mail.
There is no problem with coverage.
I will pay the fees of the lawyer of your choice.
The claim is being reviewed by senior management.
I need another 30 days to complete my investigations.
I need a copy of your policy.
I need you to go to all of the places where you bought the stolen property to get a receipt.
I will hire a contractor to rebuild your house.
I don’t have authority to settle your claim.
I don’t need to do an investigation to know your claim is not covered.
I have confirmed coverage.
Any other statement that is not true.
California Insurance Code Section 790.03(h)(1) provides:
Knowingly committing or performing with such frequency as to indicate a general business practice any of the following unfair claims settlement practices:
1. Misrepresenting to claimants pertinent facts or insurance policy provisions relating to any coverages at issue.
Similarly, the California Code of Regulations, 10 CFR 2695.4 provides:
(b) No insurer shall misrepresent or conceal benefits, coverages, time limits or other provisions of the bond which may apply to the claim presented under a surety bond.
This should be self-evident to anyone involved with insurance claims. It is a statement of prudent and common claims handling. Although this Regulation seems to apply only to surety bonds it also applies to any type of insurance. Nothing can be gained by an insurer concealing or misrepresenting information about the policy or the surety bond. Claims staff should be warned that violation of this regulation will be grounds for discipline and certain loss of employment.
On the other hand, proving that insurers and insured play the insurance claims game with a different set of rules, a mere oversight or honest mistake will not cost an insured his or her coverage; the lie must be wilful. [Claflin v. Commonwealth Ins. Co., 110 U.S. 81, 95-97, 3 S. Ct. 507, 515-16, 28 L. Ed. 76, 82 (1884)]
(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.
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 .
By Barry Zalma
. 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
Arsonist Tried To Represent Himself, Failed, and Sought Habeas Relief
Post number 5357
Read the full article at https://www.linkedin.com/pulse/he-who-acts-his-own-lawyer-has-idiot-client-barry-zalma-esq-cfe-d4bwc, See the full video at and at and at https://zalma.com/blog.
Karacson’s Arson for Profit Attempt Required Skill & Experience to Succeed
In Steve Ellis Karacson v. David Shaver, Warden, No. 25-1089, United States Court of Appeals, Sixth Circuit (May 20, 2026) Steve Karacson was convicted in Michigan state court of arson and insurance fraud after evidence showed he burned his own insured home. Investigators found multiple points of origin, gasoline odor, and evidence tying him to the scene, including cell-phone location data and a receipt showing he had purchased a gas can and gloves shortly before the fire.
FACTS
Karacson initially had appointed counsel, but his relationships with both appointed attorneys ...
Foolish to Repeatedly Disobey Court Orders
All That Remains For Trial Is Plaintiff’s Damages On Each Of These Claims And Establishing Proximate Causation Of Those Damages.
Post number 5348
See the full video at and at and at https://zalma.com/blog plus 5300 posts.
In Linh Wang v. Esurance Insurance Company, No. C24-0447-JCC, United States District Court, W.D. Washington, Seattle (May 1, 2026) John C. Coughenour, United States District Judge, found that throughout this case, culminating with its briefing on Plaintiff’s renewed motion and that Defendant has subjected Plaintiff to unnecessary motion practice for clearly discoverable information and made dubious representations (including to the Court).
FACTUAL BACKGROUND
This case involves an underinsured/uninsured motorist insurance bad faith claim arising from a 2017 motor vehicle collision. The plaintiff, Linh Wang, alleges that Esurance Insurance ...
The Right to Negotiate with Insurer is Not an Assignment of Claims
Post number 5347
Read the full article at https://www.linkedin.com/pulse/ambiguous-contract-repair-assignment-barry-zalma-esq-cfe-2xppc, see the full video at https://rumble.com/v79is1s-ambiguous-contract-to-repair-not-an-assignment.html and at and at https://zalma.com/blog plus more than 5300 posts.
Nebraska Requires an Actual Assignment to Allow Contractor to Sue Insurer
In Millard Gutter Company, a corporation doing business as Millard Roofing and Gutter v. Farmers Mutual Insurance Company of Nebraska, also known as Farmers Mutual Insurance, also known as Farmers Mutual, No. A-24-818, Court of Appeals of Nebraska (May 5, 2026) Millard sued Farmers as an assignee of Jane Anzalone who had hired Millard Gutter to repair the roof of her home and agreed to allow Millard Gutter to coordinate with her insurer, Farmers Mutual, concerning reimbursement for repairs authorized under her insurance policy.
FACTUAL BACKGROUND
In ...
Qui Tam Case Without Evidence to Prove Fraud Fails
Post number 5369
Read the full article at https://www.linkedin.com/pulse/qui-tam-insurer-contended-defrauded-barry-zalma-esq-cfe-pgfgc and at https://zalma.com/blog plus more than 5550 posts.
In People Of The State Of California Ex Rel. Heath & Yuen, APC v. Silver Bird Auto Leasing, LLC et al., B342847, California Court of Appeals, Second District, Eighth Division (June 5, 2026) Heath & Yuen, APC defended parties in an automobile collision case involving a McLaren and a tour van. After that case settled for $25,000, the firm filed a qui tam action under California’s Insurance Frauds Prevention Act (IFPA) against Silver Bird Auto Leasing, LLC, X-Law Group, PC, and Filippo Marchino. The firm alleged three fraudulent acts in the underlying litigation:
1. the complaint falsely stated the McLaren was making a “legal turn,”
2. respondents produced a fraudulent repair bill/estimate, and
3. respondents failed to disclose Marchino’s GEICO insurance and its payment for repairs....
Full Faith and Credit Act Controlled
Read the full article at https://lnkd.in/evHXiiFE and at https://zalma.com/blog.
Posted on June 9, 2026 by Barry Zalma
Post number 5368
Posted on June 9, 2026 by Barry Zalma
In Prime Insurance Company, Inc. v. Medicab Transportation, LLC, Jason Rhodes, and Dale Johnson v. Prime Insurance Company, Inc and Prime Property & Casualty Insurance, Inc. No. 2:24-cv-421-SPC-KRH, United States District Court, M.D. Florida, Fort Myers Division (June 3, 2026) Medicab, a paratransit company, bought two policies in 2021: a Business Auto Policy from PPCI and a Commercial Liability Policy from Prime. Both policies, as originally written, appeared to cover injuries arising from loading and unloading patients from Medicab vans.
After a patient, Margaret St. Aubin, fell while being unloaded from a van and suffered injuries, her Estate made a $1 million demand. Prime and its claims administrator concluded that the Commercial Policy’s loading/unloading language had been included by mutual mistake, because...
Full Faith and Credit Act Controlled
Read the full article at https://lnkd.in/evHXiiFE and at https://zalma.com/blog.
Posted on June 9, 2026 by Barry Zalma
Post number 5368
Posted on June 9, 2026 by Barry Zalma
In Prime Insurance Company, Inc. v. Medicab Transportation, LLC, Jason Rhodes, and Dale Johnson v. Prime Insurance Company, Inc and Prime Property & Casualty Insurance, Inc. No. 2:24-cv-421-SPC-KRH, United States District Court, M.D. Florida, Fort Myers Division (June 3, 2026) Medicab, a paratransit company, bought two policies in 2021: a Business Auto Policy from PPCI and a Commercial Liability Policy from Prime. Both policies, as originally written, appeared to cover injuries arising from loading and unloading patients from Medicab vans.
After a patient, Margaret St. Aubin, fell while being unloaded from a van and suffered injuries, her Estate made a $1 million demand. Prime and its claims administrator concluded that the Commercial Policy’s loading/unloading language had been included by mutual mistake, because...
