Claims Commandment VIII – Thou Shall Not Suffer Fraud to Succeed
Barry Zalma
Claims Commandment VIII – Thou Shall Not Suffer Fraud to Succeed
Read the full article at https://lnkd.in/g7k4XU-j and see the full video at https://lnkd.in/gwG-huuk and at https://lnkd.in/gUmX3Sqe and at https://zalma.com/blog plus more than 4350 posts.
Posted on November 10, 2022 by Barry Zalma
See the full video at https://rumble.com/v1rzynm-claims-commandments.html and at
Insurance fraud in the U.S. is epidemic. Insurance fraud continually takes more money each year than it did the last from the insurance buying public. Estimates of the extent of insurance fraud in the United States used to range from $87 billion to $308 billion every year. Recently, the Coalition Against Insurance Fraud changed its long-held estimate of $80 billion a year to $308 billion a year in 2022.
In truth no one really knows the extent of insurance fraud because most insurance fraud schemes succeed without the insurer even suspecting that it is being defrauded.
Insurers and government backed pseudo-insurers can only estimate the extent they lose to fraudulent claims. No one will ever place an exact number on the amount lost to insurance fraud but everyone who has looked at the issue know – whether based on their heart, their gut or empirical fact of convictions for the crime of insurance fraud – that the number is enormous. When insurers and governments put on a serious effort to reduce the amount of insurance fraud the number of claims presented to insurers and the pseudo-insurers drops logarithmically.
What Do The Results of the Effort Against Fraud Really Show?
Insurance fraud prosecutions and investigations are anemic. What the reports do not tell is that most of those convicted were sentenced to probation. Few made full restitution and those who served time were few and far between. Insurance criminals are laughing at the insurance industry, the police agencies, the Fraud Divisions and the prosecutors. If they are one of the few criminally convicted, they face an average sentence of only five years’ probation and 60 days in jail. Jail time is usually served on weekends so that the convicted fraud perpetrators can still ply their fraudulent trade on weekdays.
For insurance fraud to be prosecuted the insurer must do the work to complete a thorough investigation that can be presented to a prosecutor because police, federal investigators, prosecutors and even Fraud Division investigators will do nothing until the case is presented to them in detail by an insurer. In fact, most states have statutes that compel insurers to maintain a Special Investigative Unit (SIU) to investigate fraud claims and provide the results of that investigation to the state Department of Insurance.
Every person involved in the business of insurance must understand that insurance fraud is the orphan child of the criminal justice system. Insurance fraud will never be totally defeated. It will be reduced and may be made unprofitable to the perpetrators when the public and prosecutors recognize that insurance fraud is a serious problem that effects their own financial condition.
Everyone involved in the business of insurance and everyone who buys insurance must make it clear that they are angry with what is happening to their insurance premium dollar. When I, and everyone who has ever purchased a policy of insurance, hear that $300 out of every $1,000 we pay in premium goes to a criminal we should all want to scream out the window, as did the character in “Network” — “I’m mad as Hell, and I’m not going to take this anymore!”
What is Fraud?
Insurance fraud is a tort, a civil wrong and a crime. Black’s Law Dictionary, 6th Edition, defines fraud as:
"An intentional perversion of the truth for the purpose of inducing another in reliance upon it to part with some valuable thing belonging to him or to surrender a legal right; a false representation of a matter of fact, whether by words or by conduct, by false or misleading allegations or by concealment of that which should have been disclosed, which deceives and is intended to deceive another so that he shall act upon it to his legal injury."
In simple language, fraud can be defined as a lie told for the purpose of obtaining money from another who believes the lie to be true. Civil insurance fraud exists if an insured makes a representation to the insurer that the insured knows is false; conceals from the insurer a fact he or she knows is material to the insurer; makes a promise he or she does not intend to keep; and makes a misrepresentation on which the insurer relies in issuing the policy, that results in the insurer incurring damage.
The claims professional should be aware of the limitations of the criminal statute in the state where he or she practices.
Investigating Fraud
The beginning of a thorough insurance fraud investigation is the interview. The interview can be informal, it can be recorded with an audio recording device, it can be recorded with a handwritten statement signed by the witness, or it can be recorded by a certified shorthand reporter under oath. The interview is a structured conversation. It is not an interrogation. It is not the stuff of spy films, police investigations, or prisoner of war camps. Interviews are everywhere. Interviewing is an art. Use of methods similar to those used by scientists conducting experiments is a more accurate description of interviewing.
Conclusion
Whenever fraud is suspected it is the duty of the insurer, its claim staff and its special investigation unit (SIU) to conduct a thorough investigation. If a preponderance of the evidence gathered reveals that a fraud has been committed: that there was a material misrepresentation or a concealment of a material fact, made with the intent to deceive the insurer, that the insurer was actually deceived, and that the insurer was damaged by the deception, the claim must be rejected.
If a preponderance of the evidence does not exist or establishes there was no fraud the claim should be paid.
If you wish to know everything there is to know about insurance fraud, Barry Zalma has totally rewritten his seminal book on insurance fraud in two volumes. Volume I is Available as a Kindle book; Available as a Hardcover; Available as a Paperback Volume II is Available as a Kindle book; Available as a Hardcover; Available as a Paperback
(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
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
In September 2021, the State of California filed felony charges against Simon Semaan, alleging violations of Insurance Code section 11760(a) for making...
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
Endo filed Chapter 11 in August 2022; before bankruptcy it ...
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 ...
